IFM25025 | Real Estate Investment Trust : Capital gains: computational rules: transfers of assets within a group where the principal company is a single company UK-REIT: TCGA1992/S171 and S171A

A single company UK-REIT may be the principal company of a capital gains group. TCGA1992/S171(1) does not apply to a disposal by or to such a company because of TCGA1992/S171(2)(da). The disapplication does not however extend to a group of companies that has joined the regime to be a Group REIT (CTA2010/S601).

TCGA1992/S171(2) contains a list of types of companies to which S 171(1) (transfer within a group: general provisions) do not apply. TCGA1992/S171(2)(da) adds UK-REITs to this list, but has effect only where the principal company of a group has elected to join the regime as a single company (see IFM23005). The operation of TCGA1992/S171 for a Group REIT is covered by CTA2010/S601, and an example of how it works can be found at IFM25030.

Where a company with 75% subsidiaries forming a capital gains group joins the regime as a single company UK-REIT, the principal company is covered by the UK-REIT rules in CTA2010/Part 12 but its subsidiaries are not. In this case, the principal company cannot dispose of assets at no gain/no loss to its subsidiaries. Neither can the subsidiaries transfer assets to the principal company at no gain/no loss, but one subsidiary can use TCGA1992/S171(1) to transfer an asset to another subsidiary at no gain/ no loss. TCGA1992/S171(1) cannot apply to an actual disposal of an asset, used in the property rental business, to or from a principal company. In these circumstances, it follows that the principal company cannot be a party to an election to deem a disposal under TCGA1992/S171A in respect of its property rental business assets to arise in a 75% subsidiary. However, a 75% subsidiary could use TCGA1992/S171A to elect a gain into another member of the group (which was not the principal company) including a gain arising on a transfer of an asset which begins to be used by the principal company for its property rental business.