GREIT05025 - Capital gains: computational rules: transfers of assets within a group where the principal company is a single company UK-REIT

A single company UK-REIT may be the principal company of a capital gains group. The rule in section 135 FA 2006 disapplies section 171(1) TCGA in this situation. The disappliction does not however extend to a group of companies that has joined the regime to be a Group REIT.

Section 171(2) TCGA contains a list of types of companies to which section 171(1) (transfer within a group: general provisions) do not apply. Section 135 FA 2006 adds UK-REITs to this list, but has effect only where the principal company of a group has elected to join the regime as a single company (see GREIT11030). The operation of section 171 TCGA for a Group REIT is covered by section 136 FA 2006, and an example of how it works can be found at GREIT05030.

Where a company with 75% subsidiaries forming a capital gains group joins the regime as a single company UK-REIT, the principal company is covered by the UK-REIT rules in Part 4 FA 2006 but its subsidiaries are not. In this case, the principal company cannot dispose of assets at no gain/no loss to its subsidiaries. Neither can the subsidiaries transfer assets to the principal company at no gain/no loss, but one subsidiary can use section 171(1) TCGA to transfer an asset to another subsidiary at no gain/ no loss.

Because section 171(1) cannot apply to an actual disposal of an asset to or from a principal company in these circumstances, it follows that the principal company cannot be a party to an election to deem a disposal under section 171A TCGA.