CG40251 - Capital loss anti-avoidance rule: The tiering effect

One consequence of the capital gains regime as it applies to groups of companies is that capital losses incurred in a subsidiary company may be reflected in a fall in the value of any parent company. Disposals of companies higher up the group can therefore lead to the recognition of further losses from the original loss making event; a feature known as “tiering”. Where the original loss results from a genuine commercial loss on a genuine disposal, such that the legislation in TCGA92/S8 as amended by FA 2006 (TCGA92/S16A with effect from 6 December 2006, see CG40241) does not apply, then, to the extent that other losses are realised through the tiering effect, the same principle will apply. Conversely, if the original loss resulted from arrangements to which the legislation does apply, then subsequent losses through tiering will not be allowable losses.