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HMRC internal manual

Shares and Assets Valuation Manual

Other compliance matters: depreciatory transactions and value shifting

A depreciatory transaction is a transaction whereby the value of the shares of one company in a group is reduced by an intra-group transaction.


Company C transfers a valuable asset to its parent, A. This is treated as a no gain/no loss transfer at the time. A later sells its shares in C and realises a loss. Under s.176 TCGA 1992, the loss can be reduced by an amount which is “just and reasonable” having regard to the earlier depreciatory transaction.

You should look at depreciatory transactions when a group has disposed of shares or securities in a subsidiary, and it makes an allowable loss on the disposal. If you detect a depreciatory transaction which occurred at sometime before the disposal - for example assets transferred at book value, goodwill transferred at nil value - you should draw the attention of the Inspector to it, so that he can consider whether the loss on disposal ought to be restricted.

  Additional Guidance: SVM150000