Taxation of Chargeable Gains Act 1992 section 176

Depreciatory transactions within a group

Section 176 addresses how allowable losses and chargeable gains on disposals of shares or securities are adjusted when the value of those shares or securities has been materially reduced by depreciatory transactions between members of a group of companies.

• Where a disposal of shares or securities (the "ultimate disposal") has been materially reduced in value by a depreciatory transaction — such as an intra-group asset transfer at below market value or another transaction involving two or more group companies — the allowable loss on that disposal may be reduced to an extent that is just and reasonable.
• The loss reduction is intended to strip out any artificial diminution in value caused by the depreciatory transaction, but credit may be given for appreciatory transactions that enhanced the value of the company's assets while depreciating those of another group member.
• Where a loss has been reduced under these rules, a corresponding reduction may be made to a chargeable gain arising on a disposal of shares or securities in another company that was party to the depreciatory transaction, provided the disposal occurs within six years, with total gain reductions capped at the total loss reductions for that transaction.
• The rules extend to negligible value claims treated as disposals, to cancellations of shares under the Companies Act 2006, and to appropriations of goodwill between group members; however, a person who was not a group member at the time of the depreciatory transaction cannot have their loss reduced by reference to it.