CGT Groups - simplification

Our predictions

HMRC have been consulting with interested parties since 2008 on measures that would make this complex subject area more rational and principled.

These consultations have been constructive and some small changes were made in the Finance Act 2009, dealing with the ability of companies to deem losses arising in one company to be treated as arising in another and thus avoid the otherwise pointless transfer of assets so as to match gains with losses.

Further possible changes have been set out in a paper published in mid February and as expected, the discussions are proceeding productively. Specifically we may see:

1. A company undertaking operations though a divisionalised structure given the ability to avoid a CGT charge where a trade and the related assets are hived down to an SPV just prior to the sale of the SPV to a third party. This will ensure that such companies will be able to use Substantial Shareholdings Exemption in the same way as a business structured as a group.
2. Rationalising the anti-avoidance rules relating to the use of pre-entry losses. There are a number of overlapping rules and some unnecessary restrictions. The changes are, in the main, likely to be technical in nature but welcome nevertheless.
3. An announcement of continuing discussion regarding the complex value shifting rules (which counter attempts to reduce gains as well as enhance losses) in the hope that they may assimilate the depreciatory transactions rules which only apply to restrict losses.