Reviewing the draft rules on capital gains exit charges

The proposals in brief

Following extensive consultation draft clauses for the simplification of the capital gains exit charge were published on 9 December.

The main proposals are:

• The charge will increase (or decrease) the gain in the vendor company rather than creating a gain in the company being sold. Any reliefs or exemptions applicable to the sale by the vendor would therefore apply to the degrouping element of the gain;
• An amendment to the substantial shareholdings exemption (SSE) will permit companies to package up trades into new subsidiaries for sale;
• Degrouping charges are unchanged where there is no disposal; and
• There will be a just and reasonable escape clause from the degrouping charge.

Effect of the provisions

The new mechanism means that where a transaction doesn’t prima facie carry a tax charge the degrouping charge shouldn’t be a barrier to a wholly commercial transaction. This will...