TCGA92/S171 allows one company in a group to transfer an asset
to another company in the same group on a no gain/no loss basis. By
virtue of Section 170 a group is confined to companies which are
United Kingdom resident. If a non-resident company owns a United
Kingdom company directly and the United Kingdom company itself owns
another United Kingdom company, then the two United Kingdom
companies (but not the non-resident company) will comprise a group
for the purposes of Section 171.
However, two United Kingdom companies each of which is
directly owned by a non-resident company are not, and do not form
part of, a group for the purposes of Section 171. The non-
discrimination Article in a double taxation agreement does not
require two United Kingdom companies in this position to be
regarded as a group for the purposes of Section 171. The companies
should be compared not with two United Kingdom companies owned by
another United Kingdom company but with two United Kingdom
companies owned by a company resident in a third country. Since no
United Kingdom subsidiaries of a non-resident company can be a
group for the purposes of Section 171 it is not discriminatory to
deny group status to two United Kingdom companies owned by a
company in the particular country which is a party to the agreement
concerned.
