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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Residence: dual resident companies: anti-avoidance - limitation of other reliefs

Six different types of relief are within the scope of the legislation (see CTM34505) because they have the potential for avoidance. The reliefs concerned all relate to CG or capital allowance provisions. They are not available in the circumstances below.


  • Where there is a transfer of an asset to a dual resident investing company from another member of the group, the no gain/no loss basis treatment of the member making the disposal under TCGA92/S171 (see CG47005 onwards) is denied by TCGA92/S171 (2).
  • Where the member of the group acquiring the new assets is a dual resident investing company, the treatment of all the trades carried on by members of the group as a single trade under TCGA92/S175 (1) (see CG45932).

Capital allowances (where the buyer is a dual resident investing company)

  • Parties under common control are prevented from making an election under CAA01/S569 (see CA13100) by CAA01/S570 (2)(b). Under CAA01/S568 the sale is at market value.
  • If the parties are also connected persons and the sale is of machinery or plant at less than market value, disposal value is at market value, CAA01/S61 Table item 2 (see CA23250).

Capital allowances (where there is a succession to a trade by a dual resident investing company)

  • Where there is a company reconstruction without change of control, the operation of the continuation treatment in CTA10/S940A (see CA15400) is prevented by CTA10/S949.
  • If the parties are also connected persons, a continuation election under CAA01/S266 (2) is prevented by subsection (1)(c).

These limitations, introduced by F(2)A87/S64, only come into effect when the event that would otherwise have triggered the application of these provisions takes place *on or after 1 April 1987 *and at this time the successor/acquiring company is a dual resident investing company. It is irrelevant whether or not that company is a dual resident investing company at the time the asset or trade is finally disposed of outside the group. The provisions apply to all dual resident investing companies, not only to those submitting accounts which show a loss. Indeed the accounts of dual resident investing companies engaging in these transfers for reasons of avoidance could well show a profit for UK tax purposes.

The various provisions also apply to dual resident investing companies that have never exploited the rules to obtain a double deduction and which have made a profit. If the application of any of these provisions, in these circumstances is disputed advise CTIS (Business International).