Taxation of Chargeable Gains Act 1992 section 173

Transfers within a group: trading stock

Section 173 deals with the capital gains consequences when an asset is transferred between companies in the same group and the asset changes status between trading stock and non-trading stock as a result of the transfer.

• When a group company acquires an asset as trading stock from another group member that did not hold it as trading stock, the acquiring company is deemed to have first acquired the asset as a capital asset and then immediately appropriated it to trading stock, triggering a market value disposal for capital gains purposes.
• When a group company that holds an asset as trading stock transfers it to another group member that does not hold it as trading stock, the transferor is deemed to have appropriated the asset out of trading stock immediately before the disposal, converting it into a capital asset before the intra-group transfer takes place.
• In both cases, the normal no gain/no loss rule for intra-group transfers applies to the actual transfer, but the deemed appropriation into or out of trading stock crystallises any latent gain or loss at the point of the status change.
• The section only applies where the relevant trade is carried on by a UK-resident company or by a non-UK-resident company through a UK permanent establishment; if neither condition is met, the transfer is not treated as a no gain/no loss disposal and a gain or loss arises at market value.