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Capital loss created artificially

25 November 2011
Issue: 4332 / Categories: Tax cases , Admin , Capital Gains , Losses
Land Securities plc (TC1442)

The taxpayer company L entered into an avoidance scheme with a bank involving finance to purchase property. It was agreed the main objective was to create a capital loss by relying on the identification rule in TCGA 1992 s 106 to match a disposal with a later acquisition. However the company said it also served commercial purposes.

The business claimed a capital loss which HMRC disallowed.

The First-tier Tribunal said the transactions in the scheme had created an artificial basis of calculating gains and losses and the results bore no relation to the facts.

On a purposive interpretation of s 106 it was clear that it was intended to apply when the taxpayer was likely to be doing something artificial probably disposing of an asset which it intended to reacquire.

The judge Mr Justice...

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