Corporation Tax Act 2009 section 787

Company ceasing to be member of group because of exempt distribution

Section 787 provides relief from the intangible fixed assets degrouping rules when a company leaves a group as a result of a qualifying demerger, unless a chargeable payment is subsequently made to members.

• When a company leaves a group solely because of an exempt distribution (a qualifying demerger involving shares in 75% subsidiaries), the normal degrouping charges on intangible fixed assets do not apply
• However, if a chargeable payment is made to members within 5 years of the exempt distribution, the degrouping charges are reinstated
• Where a chargeable payment triggers reinstatement, HMRC or the company may make all necessary tax adjustments within 3 years of the chargeable payment, even if normal time limits have expired
• When determining whether a company is a 75% subsidiary for these purposes, shares held as trading stock (where a sale profit would be a trading receipt) are disregarded, whether held directly or indirectly