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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Transactions between connected persons: clogged losses

TCGA92/S18 (3)

TCGA/S18 (3) limits the way in which a loss can be used if it arises from a disposal to a connected person. Such a loss is said to be ‘clogged’.

The basic rule is that such a loss can only be set off against gains which

  • arise from other disposals (in the same or a later year) to that same person; and
  • arise at a time when the persons concerned are still connected.

There is an exception to this basic rule, see CG14562.

See CG45357 regarding the use of clogged losses where a gain or loss is transferred by election within a group of companies