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HMRC internal manual

Capital Gains Manual

Targeted rules to prevent income to capital converter schemes by companies - types of scheme

There are two routes by which capital losses can be used to reduce income profits:

  • Where an amount that would otherwise be chargeable to corporation tax as income is treated as a capital item through the implementation of the arrangements.
  • Where arrangements are put in place that involve a company realising a capital gain, and as part of the arrangements the company, or a related company, becomes entitled to an income deduction in computing its income or total profits chargeable to corporation tax.

In either case corporation tax on the gain is intended to be covered by capital losses, at least in part, as part of the arrangements.

TCGA92/S184G to H deal separately with the two types of behaviour. TCGA92/S184I covers matters in connection with the issue of notices directing the application of the legislation in cases where HMRC have a reasonable belief that the relevant conditions apply.

An informal clearance procedure is available in relation to the operation of TCGA92/S184G to H. See CG44150+.