CG47460 - Capital loss streaming from 19 July 2011: public sector transfers

TCGA92/SCH7A/PARA11

There are special rules in TCGA92/SCH7A/PARA11 dealing with certain situations where a company joins a group as a result of transfer brought about by legislation. In broad terms, there is no restriction on accrued losses that are transferred from one person to another on a public sector restructuring.

The provisions of TCGA92/SCH7A/PARA11 apply where a statutory scheme transfers assets and liabilities to any person from a statutory public sector body, a subsidiary of such a body, or a company wholly owned by the Crown, TCGA92/SCH7A/PARA11(1), (4) and (5).

If an allowable loss, that accrued to a company transferring assets and liabilities in a transfer scheme, is treated as an allowable capital loss of the transferee company, the loss is not a pre-entry loss of the transferee for the purposes of TCGA92/SCH7A/PARA11(2). The capital gains code generally does not permit one company to benefit from another company바카라 사이트™s realised losses but the tax provisions in certain statutory transfer schemes may have this effect.

If as part of a statutory transfer scheme there is a transfer of shares or securities, and the result is that a company joins a new group, losses which accrued on disposals before the company joined the new group are not pre-entry losses in relation to that group.

Example 1: Transfer of benefit of realised losses

The tax provisions applying to a statutory transfer scheme treat allowable losses of public sector company X as allowable losses of privatised company Y, which is a member of the B group. The allowable losses are not pre-entry losses in relation to the B group.

Example 2: Companies joining new group as a result of a public sector transfer

In a statutory transfer scheme all the shares in a government owned company AX are transferred to a private sector company BZ in the B group. AX has a wholly owned subsidiary AY.

Any losses accruing to AX or AY before they joined the B group are not pre-entry losses in relation to the B group.

Note: Additional rules relating to loss buying were enacted in FA 2006. See CG47020+ for guidance on the rules which apply in priority to TCGA92/SCH7A for accounting periods ending on or after 5 December 2005.