Corporation Tax Act 2009 section 783

Certain associated companies leaving group at the same time

Section 783 provides relief from the degrouping charge on intangible fixed assets where two closely associated companies leave a group together, but preserves the charge if the asset effectively leaves the group's control at a later date.

• When two companies leave a group at the same time, the degrouping charge under section 780 does not apply to intra-group transfers between them, provided they remain 75% subsidiaries and effective 51% subsidiaries of a common parent (or one of the other) from the date of transfer until immediately after they leave the group.
• If the transferee company subsequently leaves a second group that has a relevant connection to the first group, the degrouping charge is reinstated as though both companies had been members of that second group at the time of the original transfer.
• This ensures that relief is only available where the two companies genuinely stay together; if there is a later effective separation through a connected group, the tax charge is triggered at that point.
• An exception applies where the degrouping arises from a merger carried out for genuine commercial reasons and not primarily for tax avoidance purposes.