Finance Bill Tracking Service 2007 | Budget 2007 | Budget Notes

BN09 Corporate capital loss and gain buying

Who is likely to be affected?

1   Groups of companies engaged in buying and selling companies in order to secure a tax advantage through gaining access to their capital losses and gains.

2   Certain companies with qualifying losses arising from deemed disposals prior to 2005 Pre-Budget Report (PBR) under the de-grouping rules.

General description of the measure

3   Legislation will be introduced in Finance Bill 2007 to stop schemes which exploit an exception provided within one of the targeted anti-avoidance rules (TAARs) introduced in December 2005.

4   It will also simplify the conditions that need to be met for relief granted under sections 70(9) and 70(10) of Finance Act 2006 (FA 2006) for certain companies with pre 2005 PBR qualifying losses arising from de-grouping deemed disposals.

Operative date

5   The legislation will apply to losses or gains accrued or realised on or after 21 March 2007.

Current law and proposed revisions

6   One of the targeted anti-avoidance rules introduced at 2005 PBR is intended to prevent groups of companies securing a tax advantage in situations where a company changes ownership and one of the main purposes of the arrangements is that the new owners might gain access to capital losses or gains realised by that company.

7   The current rules in sections 184A and 184B Taxation of Chargeable Gains Act 1992 (TCGA) provide that:

•   whenever there is a change of company ownership as a consequence of arrangements, the main purpose or one of the main purposes of which is to secure a tax advantage involving the deduction of a capital loss from any chargeable gains, then that loss may not be deducted from a gain unless both the gain and the loss arise from assets within the same ownership before the change.

8   The current rules in sections 70(9) and 70(10) FA 2006 provide that:

•   where, prior to 2005 PBR, companies had realised a loss on certain deemed disposals of assets by de-grouping, these losses can be set against gains accruing on other pre-change assets owned by the company holding those assets or any other company that was in the same group as it prior to the de-grouping.

9   Amendments will be made to the current rules to ensure that:

•   arrangements involving the purchase of a company together with its subsidiary companies in order to gain access to their losses or gains will not sidestep the rules in sections 184A and 184B TCGA; and,

•   relief provided by sections 70(9) and 70(10) FA06 is available after the amendments to sections 184A and 184B TCGA and the conditions attaching to that relief are also simplified so that companies do not necessarily lose the relief following a takeover of the original group, or where the company that incurred the loss is sold or liquidated.

Further advice

10 Draft legislation and an explanatory note for these changes are published on 21 March 2007.

11 If you have any questions about this change, please contact Phil Donlan on 020 7147 2633 (email: Information about Budget measures is available on the HM Revenue & Customs website at