Corporate Capital Gains Degrouping Charges (Simplification)

Monday 4th April 2011 Written Statements

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

I am announcing today the Government’s intention to present to Parliament a proposed legislative change to schedule 10 to the Finance Bill. This schedule simplifies the calculation of chargeable gains degrouping charges for companies. The change we are proposing, which will have effect from 1 April 2011, will allow companies the option to apply the new degrouping charge provisions to transactions occurring from 1 April 2011 rather than only after the passing of the Finance Act.

A degrouping charge is intended to prevent loss of tax on gains that arise on the disposal of assets, where a company owning the asset is sold. This can be used for tax avoidance. Companies identified it as one of the most burdensome tax rules that affect them when they are making an acquisition or disposal, or restructuring.

The new provisions in schedule 10 provide greater certainty to companies planning acquisitions and disposals. The changes will promote growth in the economy by removing some tax barriers to corporate transactions, reducing the costs of restructuring a business and simplifying the process.

The changes made by schedule 10 have already been welcomed by many businesses. I am announcing this new change in response to recent representations, to ensure that the benefits of the changes we are making are available to those groups that are currently in the process of a reconstruction, or considering making an acquisition or disposal.

HM Revenue and Customs will publish a technical note on its website setting out further detail, including the draft legislative amendments.