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Corporate Capital Gains

Volume 574: debated on Thursday 30 January 2014

I am announcing today the Government’s intention to include in the Finance Bill 2014 a legislative change to the Taxation of Chargeable Gains Act 1992. This will confirm that the targeted anti-avoidance rule preventing the use of capital losses in schemes to shelter income profits from corporation tax applies to all arrangements in which a chargeable gain accrues and however the tax deduction is achieved. This change will have effect from today.

HMRC has become aware of artificial arrangements where it is argued that these rules do not apply due to the particular way in which the chargeable gain and tax deduction arise. Such an interpretation is contrary to the original intention that the rule should be of general application to ensure that a company’s capital losses are only used to relieve chargeable gains that arise from genuine commercial transactions.

The amendment will put it beyond doubt that the rule applies to all arrangements where capital losses are misused in an attempt to reduce income profits. This confirms the purpose of the rule rather than extend its intended scope.