Taxation of Chargeable Gains Act 1992 section 171B

Election under section 171A: effect

Section 171B sets out what happens when two companies in the same group make a joint election under section 171A to reallocate a chargeable gain or allowable loss from one group company to another.

• The election causes all or a specified part of a chargeable gain or allowable loss to be treated as accruing to the receiving company (company B) instead of the disposing company (company A), with the gain or loss retaining its original timing
• Where company B is not UK resident, the reallocated gain or loss is treated as arising in respect of a chargeable asset held by that company, ensuring the gain or loss remains within the scope of UK corporation tax
• A chargeable asset for these purposes is one where any gain on its disposal would be a chargeable gain subject to UK corporation tax, for example because it is held through a UK permanent establishment
• Any payment made between company A and company B in connection with the election is ignored for corporation tax purposes and is not treated as a distribution, provided the payment does not exceed the amount of the reallocated gain or loss