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HMRC internal manual

Corporate Finance Manual

Foreign exchange: matching: bringing amounts back into account: no gain/no loss disposals - transitional rule

Election under regulation 14 of SI 2010/809

This guidance applies only to share disposals on or after 6 April 2010

Where shares have been transferred by means of no gain/no loss disposal, and there is a subsequent disposal of the shares on or after 6 April 2010, the amendments to the EGLBAGL Regulations made by SI 2010/809 apply in relation to the earlier no gain/no loss disposal, even if this happens before 6 April 2010. See example 1 at CFM62330.

The interaction between the EGLBAGL Regulations and indexation allowance means that this can disadvantage the taxpayer in some circumstances. For this reason,

  • where a company disposes of an asset on or after 6 April 2010, and
  • there has been a previous no gain/no loss disposal of the asset, but a net gain or net loss accruing on that disposal has not yet been brought into account,

the company making the disposal can elect under regulation 14(4) of The Exchange Gains and Losses (Bringing into Account Gains or Losses)(Amendment) Regulations 2010 (SI 2010/809) for the ‘old version’ of the EGLBAGL Regulations to continue to apply to that net gain or loss.

Such an election must be made to HMRC within 12 months of the external disposal of the asset, and must specify the asset concerned and include a computation of the net gain or net loss.


The facts are as in example 1 at CFM62330, except that instead of a ‘net gain’ of £455,500 accruing to X Ltd up to the time of the intra-group transfer on 1 March 2005, we suppose that a net loss of the same amount arises.

If no election under regulation 14(4) is made, Y Ltd will have an overall ‘net loss’ of £1,256,700 - its own loss of £801,200 plus £455,500 from X Ltd. The CG computation on Y Ltd’s disposal of the shares (assumed substantial shareholding exemption does not apply) will be:

Disposal consideration 4,000,000
Reduction under EGLBAGL Regulations (1,256,700)
Acquisition cost (3,057,000)
Allowable loss 313,700


If, on the other hand Y Ltd makes an election under regulation 14(4) of the amending regulations, the net loss of £455,500 that has already crystallised on the occasion of the no gain/no loss disposal will continue to be brought into account under the ‘old rules’, as a free-standing capital loss. The election has no effect on the net loss of £801,200 accruing to Y Ltd, which has not been crystallised by a no gain/no loss disposal: this continues to be brought back into account by reducing the disposal consideration for the shares.

With an election, the CG computation on the share disposal becomes:

Disposal consideration 4,000,000
Reduction under EGLBAGL Regulations (801,200)
Acquisition cost (3,057,000)
Unindexed gain 141,800
Indexation allowance on acquisition expenditure (141,800)
Indexed gain Nil


Overall, Y Ltd has neither gain nor loss on the share disposal, but brings into account a free-standing capital loss of £455,500, representing the previously disregarded exchange loss on X Ltd’s matched borrowing. Making the election therefore gives Y Ltd a greater capital loss.

On the other hand, if Y Ltd wants to transfer the loss under TCGA92/S171A to another group company that has realised a chargeable gain, it may not be in the group’s best interest for Y Ltd to make the election. Without an election, the loss on the share disposal may be reallocated in this way; with an election, the free-standing capital loss that results cannot be reallocated (CFM62300).