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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Restrictions: capital losses: introduction: general

Before FA93, it was possible for groups to exploit the no gain/no loss rule andeffectively buy capital losses from other groups, without any restriction on how thelosses could be used.

EXAMPLE 1: PURCHASE OF REALISED LOSS

Group M has a subsidiary MA which will shortly sell an asset and realise a chargeablegain £10M. A wholly unrelated group L has a subsidiary LV with a realised allowable loss£10M which group L cannot use. Group L sells the loss vehicle LV to the M group for £1M.MA transfers the gain asset to LV at no gain/no loss. LV sells the gain asset to anunconnected third party, and realises the chargeable gain £10M. This gain is sheltered byLV’s loss £10M.

In this way the M group has obtained the benefit of a capital loss which accrued on adisposal by a different group altogether.

EXAMPLE 2: PURCHASE OF UNREALISED LOSS

Group M has a subsidiary MA which will shortly sell an asset and realise a chargeablegain £15M. An unrelated group L has a subsidiary LV, and LV holds a valueless asset withan unrealised loss £15M. Group L sells the loss vehicle LV to the M group for £1.5M. LVtransfers the loss asset at no gain/no loss to MA. Company MA sells the gain asset to anunconnected third party, realising the chargeable gain £15M, and makes a negligible valueclaim under TCGA92/S24 (2) in respect of the loss asset, realising an allowable loss£15M.

The M group has obtained the benefit of a capital loss attributable to the reduction invalue of the loss asset at a time when it was owned by a different group altogether.