Section 785 | Principal company becoming member of another group

(1)Section 780 does not apply if a company ceases to be a member of a group just because the principal company of the group becomes a member of another group (“the second group”).

(2)This subsection applies if—

(a)section 780 would have applied but for subsection (1),

(b)after the transfer and before the end of the period of 6 years after the date of the transfer, the transferee ceases to meet the condition that it is a relevant subsidiary of one or more members of the second group (“the qualifying condition”), and^F1

(c)at the time at which the transferee ceases to do so, the relevant asset is held by the transferee or another company in the same group.

(2A)For the purposes of subsection (2)(b) the transferee is a “relevant subsidiary” of a member of the second group (“A”) if, but for sections 767 to 770, the transferee would be a member of another group of which A would be the principal company.^F2

(2B)Subsection (2) does not apply if the transferee ceases to meet the qualifying condition by reason of a relevant disposal of shares by another company (within the meaning given by section 782A(2)).^F2

(3)If subsection (2) applies, this Part applies as if immediately after the transfer to the transferee of the relevant asset the transferee had—

(a)realised the asset for its market value at that time, and

(b)immediately reacquired the asset at that value.

(4)The adjustments to be made as a result of subsection (3), by the transferee or a company to which the relevant asset has been subsequently transferred, in relation to the relevant period must be made by bringing the total net credit or debit into account as if it had arisen immediately before the transferee ceased to meet the qualifying condition.

(5)In subsection (4) “the relevant period” means the period between—

(a)the transfer of the relevant asset to the transferee, and

(b)the transferee ceasing to meet the qualifying condition.

(6)This section is subject to section 789 (merger carried out for genuine commercial reasons).

(7)References in this section to “the transferee” and “the relevant asset” must be read in accordance with section 780.

(8)For the way in which Chapter 7 applies if a company is treated as having realised an asset as a result of this section, see section 791 (application of roll-over relief in relation to degrouping charge).