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HMRC internal manual

Banking Manual

Banking surcharge: calculation of surcharge profits: chargeable gains – s171 transfers between banking and non-banking companies

TCGA92/S170 defines a group of companies for capital gains purposes.  The rules at TCGA92/S171 allow for the transfers of chargeable assets to other members of a group at nil gain, nil loss. 

HMRC considers that some s171 transfers between banking and non-banking companies will be caught by the anti-avoidance rule at CTA10/S269DN.   This may be the case where the transfer takes place where a capital gains disposal is imminent and the bank can reasonably determine that the transfer will result in a significant reduction in surcharge profits.  See BKM406100 for further guidance on the surcharge anti-avoidance rules.

Examples of s171 transfers that might be caught by the anti-avoidance rule:

(a) A banking company transfers a capital gains asset standing at a capital gain to an non-banking company and the non-banking company sells the asset shortly afterwards.  The group was expecting to dispose of the asset to a third party before the transfer took place.  The transfer results in a significant reduction in the surcharge profits the banking company would have made if the transfer had not taken place. 

(b) A non-banking company that was intending to dispose of a capital gains asset standing at capital loss transfers that asset to a banking company which sells the asset shortly afterwards.  The banking company uses the capital loss to offset other capital gains in that chargeable accounting period resulting in a significant reduction in its surcharge profits.

The anti-avoidance provision will not apply where a group company transfers capital gains tax assets to other members of the group for reasons not closely linked to imminent disposals, for example due to changes in the investment holding entity within a group.

See BKM403850 re s171A transfers between banking and non-banking companies