From 1 April 2000, it became possible for groups to bring chargeable gains and allowable losses together in the same company without the need to actually transfer assets within the group before a sale to a third party. This result can be achieved by a joint election.

Election conditions:

Two companies, A and B, that are members of a group can make an election if –

• a chargeable gain or allowable loss in respect of an asset accrues to A,
• B is a member of the same group at the time the gain or loss accrues to A, and
• a transfer of the asset from A to B immediately before that time would have been at no gain/no loss.

The requirement that a gain or loss accrues “in respect of an asset” means that the vast majority of gains and losses can be transferred by election. There is no requirement for there to be any actual disposal of an asset to any person so most gains and losses that were not within the original rule are now accommodated.

Election requirements:

The election can be made at any time up to two years after the end of A’s accounting period in which the gain or loss accrued.

The election can specify the transfer of the whole of a gain or loss or a specified part of one.

Effect of election:

The effect of the election is that the gain or loss that accrued to A instead accrues to B at the time it would otherwise have accrued to A.

Please note that because it is a condition that the gain or loss first accrues in A then the chargeable gain or allowable loss is computed in the normal way according to the circumstances of A. This includes applying any exemption, relief or adjustment that may be applied in calculating an individual gain or loss. When a chargeable gain is transferred to B by election then the deductions that are available against the total of B’s gains for the accounting period may be used; most notably allowable losses.

Any payment that passes between A and B in connection with an election is not taken into account in computing the profits or losses of either company for corporation tax purposes.

A capital gains tax charge was introduced for disposals of an interest in residential property on or after 6 April 2013 on which an ATED gain or loss arises – see article Annual Tax on Enveloped Dwellings and ATED-related CGT. An election cannot be made in respect gains or losses accruing on such a disposal.