In our last article on corporate groups, we looked at the subgroup exception as it applies to intra-group transfers. We showed, using both numerical and visual examples, why there should be an exception. In this article we shall see how the tax legislation ensures that this is indeed the case. As before, we shall be concentrating on the rules for capital assets – the rules for IP are similar.
As has been stated in previous articles, the degrouping rules are designed to prevent assets from being smuggled out of a group tax free under the protection of a corporate wrapper. This is achieved by imposing a tax liability when a company acquires an asset from a fellow group member and subsequently leaves the group within the next 6 years.
But for every rule, there is an exception.