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HMRC internal manual

Capital Gains Manual

Administration: losses: targeted rules to prevent the contrived creation of capital losses by companies - effect of the legislation and commencement

The effect of the FA 2006 amendments to TCGA92/S8 is that any capital loss arising on adisposal made on or after 5 December 2005 will not qualify as an allowable loss when itarises in connection with arrangements having a main purpose of obtaining a tax advantage.

Where the legislation applies, it will take effect to disallow losses that arise ondisposals made on or after 5 December 2005.

With effect from 6 December 2006, the anti-avoidance provisions in TCGA92/S8 were repealedand replaced by new legislation in TCGA92/S16A.

This is because the Targeted Anti-Avoidance rule relating to the creation of artificiallosses was extended to encompass Capital Gains Tax as well as Corporation Tax onChargeable Gains. There is no change to the effect of the legislation on companies.