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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
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Transactions between dealing and non-dealing associated companies

ICTA88/S774 was aimed at transactions which attempt to exploit mismatches in tax treatment between a ‘dealing company’, that is a company carrying on a trade of dealing in securities, land or buildings, and an associated ‘non-dealing company’, defined as any company which is not a ‘dealing company’.

The section was not rewritten into CTA10 on the grounds that it is obsolete.  Repeal was recommended to the Law Commission and the section was repealed by entry into Group 1 of Part 10 of Schedule 1 to the Statute Law (Repeals) Act 2013.

The Law Commission explained the repeal of ICTA88/S774 as justified on the basis of four factors

  • TCGA92/S161 and S173, which deal with appropriation of assets held as trading stock
  • TCGA09/PART5 to PART7, the loan relationships and derivative contracts provisions
  • CTA09/S695, transfers of value between connected companies, in particular as regards abandoned options, and
  • CTA09/S354, exclusion of debits for impaired or released connected companies’ debits – this would deny to a dealing company relief for loss in value of its loan to an associated non dealing company where the loan is written down due to lack of creditworthiness of the non-dealing company.  CTA09/S464 gives priority to CTA09/PART5 which means ICTA88/S774 (1)(b) is superseded.

An archive copy of the guidance is available from CTIS (Technical).