Reform of de-grouping charge rules in the corporate intangibles regime
Updated 7 November 2018
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This publication is available at https://www.gov.uk/government/publications/reform-of-de-grouping-charge-rules-in-the-corporate-intangibles-regime/reform-of-de-grouping-charge-rules-in-the-corporate-intangibles-regime
Who is likely to be affected
Companies that own or acquire intangible fixed assets, including goodwill.
General description of the measure
This measure amends the corporate intangible fixed assets (IFA) regime to more closely align the de-grouping charge rules with the equivalent rules in the chargeable gains code.
Policy objective
The measure is intended to reduce frictions that inhibit commercial mergers and acquisitions. It achieves this by reforming the de-grouping charge rules so that a charge will not arise as a result of a commercial share disposal that qualifies for the Substantial Shareholding Exemption.
Background to the measure
The government announced a consultation on reform of the corporate intangibles regime at Autumn Budget 2017. The consultation was carried out between February and May 2018. A summary responses will be published alongside the Finance Bill 2018.
Detailed proposal
Operative date
The changes will have effect in relation to de-groupings that occur on or after 7 November 2018.
Current law
The Corporation Tax rules that deal with intangible fixed assets are contained in Part 8 Corporation Tax Act 2009 (CTA09). The rules apply to intangible fixed assets and purchased goodwill that are recognised in a company’s accounts in accordance with generally accepted accounting practice. Generally, Part 8 taxes gains and losses on such assets as income and gives relief for the cost of acquiring such assets as and when the expenditure is written off in the company’s accounts.
The Part 8 rules allow groups of companies to transfer assets between subsidiary companies in the group without incurring a tax charge or realising a tax benefit (known as ‘tax neutral’ treatment). The rules contain an anti-avoidance provision known as a de-grouping charge, which crystallises a tax charge or benefit if a company that has received an asset on a tax neutral basis leaves the group within 6 years of the transfer.
Proposed revisions
Legislation will be introduced in the Finance Bill 2018 to amend chapter 9 of Part 8 CTA09 so that a de-grouping charge will no longer arise in situations in which a company leaves a group as a result of a share disposal that qualifies for the Substantial Shareholding Exemption under paragraph 1 of schedule 7AC of the Taxation of Capital Gains Act 1992. In such circumstances the assets that would have been subject to a de-grouping charge will remain at their tax written-down value and continue to attract relief under chapter 3 as they did prior to de-grouping. This treatment will not apply if the share disposal is part of a wider arrangement under which the acquirer is to dispose of the shares to another person.
Summary of impacts
Exchequer impact (£m)
| 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 |
|---|---|---|---|---|---|
| - | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There will be no impact on individuals and households. The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated there will be any impacts on groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on a small number of businesses that own intangible fixed assets and which are part of a group of companies. It will affect the amounts they are required to bring into account for Corporation Tax purposes in respect of de-grouping transactions, which are infrequent. One-off costs include familiarisation with this new measure. Ongoing savings will include reduced calculations when de-grouping transactions occur.
The measure is not expected to have an impact on civil society organisations.
Operational impact (£m) (HMRC or other)
The measure is likely to require changes to the iXBRL tagging taxonomy for Corporation Tax computations and associated information technology systems that will cost approximately £355,000.
The compliance impact of the changes is expected to be negligible.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact the HMRC Corporate Intangibles Team on telephone: 03000 575 610 or email: [email protected].