(1)This section applies where—
(a)
a chargeable gain or an allowable loss accrues to a company (“company A”) in respect of an asset (or would so accrue but for an election under this section),
(b)
at the time of accrual, company A and another company (“company B”) are members of the same group, and
(c)had company A disposed of the asset to company B immediately before the time of accrual, section 171(1) would have applied.
(2)In determining for the purposes of subsection (1)(c) whether subsection (1) of section 171 would have applied, it is to be assumed that subsection (1A)(b) of that section read—
“(b)that—
(i)at the time of the disposal, company B is resident in the United Kingdom, or carrying on a trade in the United Kingdom through a permanent establishment there, or
(ii)the asset is a chargeable asset in relation to company B immediately after the time of the disposal.”
(3)
In this section “the time of accrual” means the time the chargeable gain or allowable loss accrues to company A (or would so accrue but for an election under this section).
(4)Companies A and B may make a joint election to transfer the chargeable gain or allowable loss, or such part of it as is specified in the election, from company A to company B (but see subsection (4A)) .
(4A)An election may not be made under this section to transfer the whole or part of a ring fence chargeable gain from a company carrying on a ring fence trade to a company not carrying on such a trade.
(4B)In subsection (4A)—
“ring fence chargeable gain”, in relation to a company, means—
(a)
a chargeable gain accruing to the company on a material disposal within the meaning of section 197 (disposals of interests in oil fields etc: ring fence provisions), or
(b)
a chargeable gain treated as accruing to the company by virtue of section 197(4);
“ring fence trade” has the same meaning as in Part 8 of CTA 2010 (see section 277 of that Act ).
(5)An election under this section must be made—
(a)by notice to an officer of Revenue and Customs, and
(b)no later than two years after the end of the accounting period of company A in which the time of accrual falls.
(6)An election, or two or more elections made simultaneously, is or are of no effect if, taken together with each earlier election (if any) made in respect of the same gain or loss, it or they would (apart from this subsection) have effect in relation to an amount exceeding the gain or loss.
(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8)For the effect of an election under this section, see section 171B.
Cases considering section 171A 4
[2015] EWCA Civ 1036 · 20 October 2015Interprets
Interprets the notional-transfer election as applying only where the statutory external disposal is a disposal to an acquiring person outside the group. Repayment of the debt did not satisfy that condition. (see paras [17]-[40])
Defines the conditions for the election, including the requirement that A dispose of an asset to a person outside the group. The court treated that wording as requiring a corresponding acquisition. (see paras [17]-[19], [35]-[40])
Interprets “A disposes of an asset to” a person outside the group as requiring the disposal to result in that person acquiring the asset. This condition was not met by repayment of the debt, so the election was ineffective. (see paras [19], [35]-[40])
Applies the election’s deeming mechanism by treating an intra-group transfer and the external disposal as made by the elected group company, but only where section 171A(1) is satisfied. (see paras [17], [35]-[40])
Confirms that the election deadline is calculated by reference to the accounting period in which “the disposal to C” was made, reinforcing the requirement for a disposal to C. (see paras [17], [36])
[2012] EWHC 3649 (Ch) · 21 December 2012
Section 171A is treated as enabling a disposal outside the group while attributing the gain to another group company. The mechanism is relevant because Yeoman’s losses could be used only against actual or deemed gains attributed through that statutory process (see paras [6], [16], [27]).
The judgment treats section 171A(2) as requiring the concurrence and participation of the company entitled to the relevant gain. Joining in the election was necessary to use Yeoman’s losses, but did not itself establish an “effective offset” under the contract (see para [27]).
[2013] EWCA Civ 900 · 23 July 2013
The court explained that section 171A enabled gains on an external disposal to be treated as accruing to another group company. This formed part of the statutory context for the contractual payment mechanism. (see paras [8]; [25]; [28])
The court used the joint-election requirement as part of the technical context showing that clause 6 was drafted against the tax legislation. It did not treat the requirement as an additional contractual condition beyond the agreed set-off. (see paras [20]; [42]; [44])
What each judgment says about section 171A is in the case-law panel in the full Act.