Corporation Tax Avoidance involving losses – TAAR strengthened

Corporation Tax Avoidance involving losses – TAAR strengthened

Fri 14 Feb 2014

Legislation will be included in Finance Bill 2014 to amend the targeted anti-avoidance rule in s184G-I TCGA 1992. 

There are three TAARs within TCGA 1992 to counter arrangements which seek to obtain a tax advantage through the use of capital losses.  The TAAR in question (‘TAAR 3’) is intended to counter the use of capital losses to shelter income profits:

  • through the use of contrived arrangements to turn income into a capital receipt (s184G TCGA 1992);
  • by creating income deductions in connection with an accrued gain (s184H TCGA 1992).

However, HMRC has become aware of arrangements using derivative contracts and other financial products which have sought to sidestep these provisions.

As a result, the TAAR is being amended to ensure the TAAR operates as intended.  Firstly, s184G applies not only where there is a ‘receipt’ but also an ‘other  amount’.  Secondly, the wording in s184H now refers explicitly to ‘income deductions’, instead of ‘expenditure’.

The revised TAAR will apply to chargeable gains accruing both on a disposal on or after 30 January 2014.  The strengthened TAAR will also apply in respect of arrangements entered into after that date where a chargeable gain arises other than on a disposal.

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