The new degrouping rules: practical implications

The Finance Bill 2011 contains significant changes to the chargeable gains degrouping rules. Financial services groups should plan ahead to mitigate the effect of some of the new measures. In particular, the related extension to the SSE rules could be useful where disposing of a whole trade. The rules may assist with the disposal of SPVs because any degrouping liability will now automatically remain within the seller’s group, thereby avoiding the need to elect degrouping liabilities out of the SPV at the time of the sale. The new rules may, however, be disadvantageous for purchasers in circumstances where a target company owns an asset which has a base cost in excess of its market value at the time of the intra-group transfer.