Taxes Consolidation Act 1997 Schedule 20 paragraph 3

Business transfers to a company for shares

Paragraph 3 of Schedule 20 modifies the calculation of unindexed gains on material disposals of interests in offshore funds, specifically addressing business transfers for shares and preventing losses from arising under the offshore income gain rules.

• Where a material disposal forms part of a transfer of a business to a company in exchange for shares (under section 600), the usual capital gains tax deferral does not apply to the offshore income gain.
• The unindexed gain on such a disposal must be computed without any deduction that would otherwise be available under the section 600 relief.
• If the computation of the unindexed gain on a material disposal would otherwise produce a loss, that loss is disregarded and the unindexed gain is treated as nil.
• Any actual economic loss on the disposal remains available as a capital loss, which may be offset against other capital gains of the investor.