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D2.325 Group capital gains—computational rules for transactions outside the group

On the disposal of an asset outside the group that has been the subject of an intra-group transfer, the allowable expenditure of the transferee company is the acquisition cost as calculated at the date of the intra-group transfer (D2.311). Its gain or loss is then calculated in the usual manner, although special provisions apply when a loss accrues on a disposal as a result of indexation (see below and D2.327).

Example 1

A Ltd, B Ltd and C Ltd are all members of the same group. On 1 March Year 1 A Ltd purchased land for £200,000 and on 1 July Year 1 transferred it to B Ltd. On 1 October Year 2 B Ltd transferred the land to C Ltd, and on 1 February Year 5 C Ltd sold the land outside the group for £300,000.

The deemed consideration for the transfer on 1 July Year 1 is: