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HMRC internal manual

Investment Funds Manual

Offshore Funds: investors in non-reporting funds: computation of offshore income gain: previous no gain / no loss disposals

Regulation 40 of SI 2009/3001

When one group company disposes of an asset to another group company, there will not ordinarily be a chargeable gain or loss for corporation tax purposes on that disposal. This is the result of the no gain / no loss rule in section 171(1) TCGA1992 (for further details see the Capital Gains Manual).

The rule states that, ordinarily, if one member of a group disposes of an asset to another member of the group, and the asset remains within the scope of corporation tax on chargeable gains, the consideration is taken to be such an amount as results in no gain/no loss for the transferor. The no gain/no loss rule fixes both the consideration received for the asset by the transferor and the consideration given for the asset by the transferee. The transferor has neither a chargeable gain nor an allowable loss. The transferee effectively takes over the transferor’s capital gains cost, as augmented by indexation up to the time of the transfer under section 56(2) TCGA 1992.

This rule is modified by regulation 40 when the asset transferred is an interest in an offshore fund. Where that is the case, then the basic gain on the disposal is computed as if no indexation allowance had been available on any such earlier disposal and, subject to that, neither a gain nor a loss had arisen to the group member making the earlier disposal.


Company A transfers an interest in an offshore fund to Company B which is a member of the same group of companies. The holding was acquired ten years previously.  Indexation allowance is available to Company A, which can be deducted along with the acquisition cost to calculate the deemed acquisition cost for Company B. When Company B disposes of this holding in a later period, the amount of indexation allowance used by Company A must be deducted from the deemed acquisition cost for Company B. It is therefore Company A’s original acquisition cost which is used by Company B to calculate the basic gain.

No gain / no loss transfer of holding by Company A to Company B £ £
Market value of asset at transfer   250,000
Acquisition cost 80,000  
Indexation allowance to date of transfer 20,000  
Deemed acquisition cost (no gain / no loss)   (100,000)


Disposal of holding by Company B £ £
Proceeds from disposal   275,000
Deemed acquisition cost 100,000  
Indexation on previous no gain / no loss transfer (20,000)  
‘Basic gain’   195,000