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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Losses: allowable losses

TCGA92/S16 (1) (2)

TCGA92/S16 (1), TCGA92/S16 (2) provides that allowable losses are to be computed in exactly the same way as chargeable gains unless otherwise indicated. So if a computation results in a loss rather than a gain, the loss is allowable if a corresponding gain would have been chargeable, subject to any specific exemptions or restrictions. For example

  • losses are restricted in their use if they arise from disposals to connected persons (TCGA92/S18 (3)), see CG14561;
  • chattels disposed of at a loss are assumed to be disposed of for at least £6,000 (TCGA92/S262 (3)), see CG76590+;
  • losses accruing on the disposal of an asset are restricted to the extent that any capital allowance or renewals allowance has been or may be made in respect of it (after adjusting for any balancing charge)(TCGA92/S41), see CG15400+;
  • losses accruing in disqualifying circumstances are not allowable losses (TCGA92/S16A). For individuals and others within the charge to Capital Gains Tax see CG15835. For those liable to Corporation Tax on chargeable gains, see CG40241;
  • losses accruing to a company on the disposal of shares and securities in another company are restricted if the value of those shares or securities has been materially reduced by a `depreciatory transaction’. For example by an intra-group transfer of assets other than at market value (TCGA92/S176), see CG46500+;
  • there are restrictions to the set-off of losses where a company brings a realised loss, or an asset with a potential loss, into a group, TCGA92/S184A - F and TCGA92/SCH7A, see CG47000+;
  • there are restrictions on the set-off of losses by a company where a gain accrues as part of arrangements to convert income into gains or to secure an income deduction (TCGA92/S184G to S184I), see CG44100+;

For further restrictions and some specific reliefs see CG15820+;

For the deduction of allowable losses from chargeable gains see CG21500+. For 2010 - 11 and subsequent years gains accruing to a person in a tax year may be chargeable to capital gains tax at different rates. Thus the tax effect of losses set off against those gains can vary. Subject to any rules which may limit the gains from which losses may be deducted, losses may be set against gains in the way that is most beneficial to the taxpayer. See CG21600+.