Test your understanding
(1). What are the circumstances that will result in a degrouping charge?
(2). Which of the following items of information are needed in order to calculate a degrouping charge?
- The sales proceeds of the company being sold
- The market value of the asset at the time of the no gain, no loss transfer
- The market value of the asset at the time the company leaves the gains group
- Indexation factor from month when asset originally purchased by gains group (if prior to December 2017) to month of no gain, no loss transfer (or December 2017, if earlier)
- Indexation factor from month when asset originally purchased by gains group (if prior to December 2017) to month when the company leaves the gains group (or December 2017, if earlier)
- The price paid for the asset when it was originally purchased by the gains group
(3). In which of the following situations will there be a degrouping charge?
A XU Ltd is the holding company of a large group of companies. It has owned 100% of the ordinary share capital of SK Ltd for many years. On 1 June 2024 XU Ltd sold 20% of the share capital of SK Ltd. XU Ltd sold a building to SK Ltd on 1 May 2020.
B JX Ltd is the holding company of a large group of companies. It has owned 80% of the ordinary share capital of PJ Ltd for many years. On 1 January 2024 JX Ltd sold 15% of the share capital of PJ Ltd. JX Ltd sold a building to PJ Ltd on 1 August 2016.
