6.4 There is no group relief available whereby chargeable gains and losses in a group can be offset. Therefore it was formerly very common for a group to transfer an asset which was to be sold to a third party at a gain: the asset would be transferred to the company in the group which had capital losses, using the provisions of Section 171. This then enabled the gain to crystallise in the company which had the capital losses. 6.5 It was accepted that this was a cumbersome way of dealing with such matters: the Finance Act 2000 introduced Section 171A, so as to simplify matters. In simple terms this enables two companies in a group to jointly elect that the asset is deemed to be transferred from one group company to the other before the disposal to the third party took place. 6.6 The provision that capital assets can be moved about within a 75% group on the basis of no gain and no loss, brings with it a complex anti-avoidance section, namely Section 179, TCGA. This section features largely in the thought processes of tax advisers if a company is being sold out of a group. 6.7 Section 179 is designed to stop an asset being smuggled out of a group, with no tax on chargeable gains being payable, despite the fact that a change of ownership has occurred. 6.8 Broadly speaking Section 179 applies in respect of any assets which were transferred into the company which is leaving the group within the previous 6 years. As it is a tax which is payable by the company leaving the group, it is understandably a very relevant consideration when advising on the purchase of a company out of a group.
6.9 This is a part of the corporation tax regime which is very relevant to the Buyer in corporate finance transactions: we therefore cover it rather more fully in Chapter 4.
6.10 There are complex provisions relating to the substantial shareholding exemption. In very broad terms this enables a company which is a trading company, or the holding company of a trading group, to sell stakes of 10% or more in trading companies to a third party without a chargeable gain arising. The various entities need to be trading companies both before and after the sale.
7 Payment of Corporation Tax
7.1 For many years the payment terms for corporation tax were simple: the tax was payable nine months and one day after the year end. This is still the case for all of those companies who are paying tax at less than the full rate of corporation tax. In broad terms this relates to those companies which make taxable profits of less than £1,500,000 if they have no associates. If there are associates the bands are divided by the number of the active companies under common control. 7.2 There is now an instalment payment regime for limited companies: the first payment is due 6 months and 13 days after the start of the accounting period, with three further payments every three months thereafter. These provisions were introduced by
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