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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Value shifting: Corporation Tax anti-avoidance rule for disposals of shares or securities from 19 July 2011: interaction with other provisions

Degrouping charges

TCGA92/S179(9) ensures that a degrouping charge may be calculated to compensate for a value shift under TCGA92/S30 or TCGA92/S31. See CG45400 onwards for guidance on the degrouping charge.

Depreciatory transactions

TCGA92/S31 is primarily concerned with arrangements that reduce or eliminate capital gains but is capable of applying to disposals that produce a loss. In practice it is likely that the depreciatory transaction rule in TCGA92/S176 will apply as regards a loss. That is a mechanical rule reflecting the fact that routine commercial transactions can result in a loss for tax purposes that does not reflect the commercial position.

An example of a situation where the predecessor of TCGA92/S31 was applied to eliminate a loss can be found in the case of HBOS Treasury Services plc v HMRC [2009 UKFTT 261]. In that case an asset was transferred at its market value, and so the depreciatory effect was attributable to the no gain/no loss tax rule. Note that the transactions in that case took place before the introduction of the targeted anti-avoidance rule for corporate losses in TCGA92/S16A and involved an asset the disposal of which would not give rise to a chargeable gain so the degrouping charge in TCGA92/S179 was not applicable.

See CG46500 onwards for guidance on depreciatory transactions.

Artificial losses

In certain situations TCGA92/S31 may overlap with the targeted anti-avoidance rule for corporate losses in TCGA92/S16A (“TAAR1”). In cases which do not also feature the elimination of a gain, you should consider TAAR1 in the first instance. See CG40240 onwards for guidance on TAAR1.