Taxation of Chargeable Gains Act 1992 section 198

Schedule 7AB paragraph 9

Schedule 7AB paragraph 9 deals with the application of section 198 (election to transfer the acquisition cost of an asset between group companies) in the context of the substantial shareholding exemption regime.

• Section 198 allows group companies to jointly elect to reallocate the base cost of an asset when it is transferred between them, treating the transferee as if it had acquired the asset at the original cost.
• Paragraph 9 of Schedule 7AB modifies how section 198 elections interact with the substantial shareholding exemption, ensuring that base cost adjustments are handled correctly where exempt gains or losses are involved.
• The provision was amended by Finance Act 2011, Schedule 10, paragraph 5(c), reflecting updates to the substantial shareholding exemption rules.
• The practical effect is to ensure that where shares qualifying for the substantial shareholding exemption are transferred within a group, any section 198 election does not create unintended tax advantages or disadvantages.

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