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HMRC internal manual

Capital Gains Manual

Migration of companies: reduction of recovery charge for unused losses

CG42400 explains how exit charges under TCGA92/S185 (CG42370) that are postponed under TCGA92/S187 (CG42390) may be recovered on the happening of certain events.

The chargeable gain of the principal company may be reduced if the subsidiary company has unused allowable losses provided

  • they have not been taken into account in computing the postponed gain, and
  • an election is made, under TCGA92/S187 (5), by the two companies within two years of the event which gave rise to the charge.

A separate election is required in respect of each such event.

If the subsidiary company makes allowable losses after the relevant time, for example on assets of a UK permanent establishment, an election under TCGA92/S187 (5) may include these losses (provided they are unused).

The ‘relevant time’ is defined by TCGA92/S185 (1) as the time at which the chargeable company ceases to be resident in the UK, see CG42370.