Taxation of Chargeable Gains Act 1992 section 184G

Avoidance involving losses: schemes converting income to capital

Section 184G is a targeted anti-avoidance rule that prevents companies from using capital losses to shelter gains that have been artificially converted from what would otherwise have been taxable income.

• The section targets arrangements where a receipt that would normally be taxable as income is instead structured to arise as a capital sum, creating a chargeable gain that the company intends to offset with capital losses.
• Four conditions (A to D) must all be met before the rule applies: a receipt must arise from arrangements, it must form part of a chargeable gain against which losses exist, without the arrangements the receipt would have been taxable as income, and a main purpose must be to secure a tax advantage through loss relief.
• HMRC must issue a formal notice to the company before the rule takes effect, and once a valid notice is given, no capital losses of the company may be set against the relevant chargeable gain.
• The definition of "arrangements" is deliberately broad, covering any agreement, understanding, scheme, transaction, or series of transactions, whether or not legally enforceable.