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HMRC internal manual

Capital Gains Manual

Capital loss buying: pre-FA93: News International case: Ramsay principle

You should not accept the view that the News International case establishes that the Ramsay principle cannot apply to capital loss buying schemes. This view rests on the judge’s comments that the group capital gains provisions `…permit assets to be shuffled round within a group and the transfer of an asset which has an unrealised gain to a company which has a loss which cannot be surrendered within the group but which can be set off against gains on assets transferred to it within the group cannot be said to conflict with the inferred statutory purpose even though the asset with an unrealised gain was transferred to the company with a realised loss as a step in the realisation of the gain. There is not in any relevant sense a step inserted for the purpose of tax avoidance’. But since there was no pre-ordained series of transactions, the question whether there was a step inserted into such a series for no commercial purpose except tax avoidance did not fall to be answered. So the judge’s remarks on the group capital gains provisions are regarded as obiter dicta rather than as a second ground of the decision. They are open to question on the grounds that precisely the same comments could have been made in favour of the taxpayer in Furniss v Dawson 55TC324. The mere fact that the relevant provisions allow assets to be moved around within a group of companies does not override the need, where there is a pre-ordained series of transactions, to determine which company is to be treated as having made the relevant disposal.

Note: Additional rules relating to loss buying were enacted in FA 2006. See CG47020+ for guidance on the rules which apply in priority to TCGA92/SCH7A for accounting periods ending on or after 5 December 2005.

FA11/S46 and FA11/SCH11 greatly simplified the rules in TCGA92/SCH7A for the deduction of losses on or after 19 July 2011. See CG47400+ for guidance on loss streaming from that date.