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HMRC internal manual

Capital Gains Manual

Depreciatory intra-group dividends: losses/other amounts against profits

TCGA92/S31 (3)

TCGA92/S31 (3) provides that losses and other amounts to be set against profits are set first against profits other than chargeable profits.


In year 1, company A has chargeable profits £250,000 and other profits £200,000. In year 2, company A makes a loss £300,000. In year 3, company A pays a dividend £100,000 to its parent company B. Company B then sells company A.

The loss £300,000 in year 2 is set first against the non-chargeable profits £200,000 and only the balance against chargeable profits £250,000, leaving chargeable profits £150,000. Section 31 permits the whole of the dividend paid £100,000 to be added to the consideration received on the sale of company A by company B.

Finance Act 2011 introduced a new Targeted Anti-Avoidance Rule for disposals of shares and securities by companies on or after 19 July 2011. See CG48500+.