Election to transfer gain or loss to another group company

Where a company makes a capital gain or loss in respect of an asset, it may jointly elect with another company within the same group to transfer the gain or loss to that company. The purpose of an election is to reduce the total corporation tax payable by the group.

When to use this election

The effect of an election is to deem gains or losses to have arisen as there had been an actual transfer of assets despite no transfer or sale having occurred. For example, it can apply where a loss is deemed to arise because an asset has become of negligible value. Plus, since 2011 it can also apply to gains or losses resulting from a company leaving a group (a degrouping charge).

How to make an election

• the transferor and transferee companies must make an election in writing jointly
• a director or company secretary for each company must sign the election. This can be the same person if they are an officer of both companies
• it must be made within two years of the end of the accounting period of the transferring company
• companies can choose to transfer all of a gain or loss, or part of it.

While an election can stand alone, each company’s self-assessment corporation tax returns should include details of the transfer and the effect it has on their respective tax bills.

Withdrawal of an election

An election can be withdrawn within the same time limit that applies for making an election.