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HMRC internal manual

Capital Gains Manual

Targeted rules to prevent income to capital converter schemes by companies - grounds for the issue of a notice

HMRC will only issue a notice in a case under TCGA92/S184G(6) when it is considered on reasonable grounds that all the following apply:

  • A gain arises to a participant in the arrangements,
  • That gain effectively represents a sum that, in the absence of the arrangements, would have been charged to tax as income, either on the same company or a connected person,
  • As part of the arrangements the gain would, but for this legislation, have been reduced by allowable losses,
  • It was the main purpose, or one of the main purposes of the arrangements to achieve the conversion of the income to a capital sum.