Following the case of ICI v Colmer last year, the government has now agreed to extend group relief to any collection of UK companies with common ownership, even if there is no UK holding company but only (say) a common US parent. The relief will also extend to UK branches of overseas companies, although there is a hint that the rules for foreign branches of UK companies will be tightened.
A similar pattern follows through to taxation of chargeable gains. Companies will be able to transfer assets on a no gain/no loss basis, provided the assets stay within the charge to UK tax. So, for example, two UK sister companies with a common non-UK parent will be able to transfer assets without a tax charge. There is a further, and very helpful, relaxation relating to disposals of assets outside a capital gains tax group: at present, if there are capital losses elsewhere in the group, it is necessary physically to transfer the asset prior to disposal.
The new rules will permit companies to elect to treat an asset as if it had been transferred intra-group prior to disposal to a third party. This will give administrative savings to groups, as well as dispensing with some Stamp Duty complications.
The overall pattern is to move towards recognising the global nature of businesses, and in particular that companies should not have to fit into a particular legal structure (a UK holding company with subsidiaries) in order to benefit from tax reliefs.
There are hints that more changes may be on the way. Most fundamentally, substantial shareholdings may become an eligible asset for rollover relief purposes: this would mean that the questions of whether assets or shares should be sold may become much less important.
It may also make the UK more attractive as an international holding company location, although the changes announced to double tax relief will severely undermine this. The potential changes to rollover relief are to be the subject of more detailed consultation.
Finally, buried deep in one of the summary press releases was the comment that the current review of taxation of intellectual property will be broadened – to take in the possibility of introducing tax relief for the costs of purchasing goodwill and other intangibles.? We can but hope.
Heather Self is the chairman of the Chartered Institute of Taxation’s Technical Committee and an International tax partner with Ernst & Young
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