Taxation of Chargeable Gains Act 1992 section 38

Degrouping: time when deemed sale and reacquisition treated as taking place

Section 38 of Schedule 7AC adjusts the timing of the deemed sale and reacquisition that arises under the degrouping rules, so that where the substantial shareholding exemption would have applied, the deemed disposal is treated as occurring immediately before the degrouping event rather than immediately after the original intra-group transfer.

• When a company leaves a group and triggers a degrouping charge under section 179, the normal rule treats it as having sold and reacquired the asset at the time the asset was originally transferred within the group.
• If a hypothetical disposal of the asset immediately before the company left the group would have qualified for exemption under the substantial shareholding exemption rules in Schedule 7AC, the timing of the deemed disposal is shifted.
• In that case, the deemed sale and reacquisition is treated as taking place immediately before the company leaves the group (or ceases to meet the relevant conditions), rather than at the earlier transfer date — effectively ensuring the exemption can apply to eliminate the degrouping charge.
• Any event described as taking place "immediately before" the degrouping time is treated as occurring on the same day as that event, just moments before it.