GREIT05030 - Capital gains: computational rules: transfers of assets within a Group REIT (sections 171 and 171A TCGA)

For a Group REIT, the operation of sections 171 and 171A TCGA is affected by section 136 FA 2006, which deems G (property rental business) to be a separate group from G (residual), G (pre-entry) and G (post-cessation), taken together, for the purposes of section 171 and 171A.

(For the application of these sections where the parent company of a group has elected to join the regime as a single company, see GREIT05020 and section 135 FA 2006.)

Section 171 TCGA allows a group of companies to move assets between member companies that are within the charge to CT at no gain/no loss for TCGA purposes. A chargeable gain or allowable loss will only accrue on a disposal outside the capital gains group or to a group company that is not within the charge to CT. When this happens the practical effect is that base cost used to calculate the gain will be the original cost of the asset when it first came into group ownership. For more details on the application of sections 171 and 171A TCGA, see CGM45305+.

Where the transfer involves an asset crossing the ring fence, special rules apply. This can happen if the transfer is between

• the tax-exempt business of one group member to the non tax-exempt business of another group member, or
• the tax-exempt business of one group member to the non tax-exempt business of the same group member.

Where there is a transfer across the ring-fence, the asset is treated as having left a capital gains group for the purposes of section 171; furthermore, no election for a deemed transfer under section 171A TCGA is possible across the ring fence.

The mechanism in the UK-REIT legislation that achieves this is a result of the carve up of the group that is the UK-REIT, into four deemed groups, referred to section 134(1) FA 2006 as G (property rental business), G (pre-entry), G (residual) and G (post-cessation). In the application of sections 171 and 171A TCGA, G (property rental business) is deemed to be separate from the other deemed groups. This deeming does not however treat the other three deemed groups as separate from each other. Section 171 can apply as normal between members of those.

For background on section 134 FA 2006, see GREIT11020. The examples at GREIT05050 illustrate how section 171 TCGA operates in practice for a Group REIT.