Value shifting
Value shifting

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Value shifting
  • The general rule
  • The tax-free benefits rule: the basic rule
  • The tax-free benefits rule: corporate groups—share disposals on or after 19 July 2011

The value shifting rules are anti-avoidance provisions. They are similar to the rules applying to depreciatory transactions in that they target the artificial transfer of value out of assets as a result of transactions between connected parties. The value shifting rules, however, apply more widely.

Unlike the depreciatory transaction rules, they:

  1. do not always require an actual disposal. The rules instead impose a tax charge at the time of the value shifting transaction by deeming the asset to have been disposed

  2. can convert losses into gains and increase gains realised on a disposal (whether actual or deemed), and

  3. are applied at the level of the asset itself. There is, therefore, no need to prove a material reduction in the value of the asset holding company's shares for the rule to be applied

The two sets of rules should, however, always be considered together.

For a discussion of the anti-avoidance provisions applying to depreciatory transactions, see Practice Note: Depreciatory transactions and dividend stripping.

Without these anti-avoidance provisions, it would be possible for value to be shifted (from one asset to another) or extracted in some way without triggering a tax charge on the value shifted or extracted. This could result in allowable losses being artificially inflated or chargeable gains artificially reduced when there is a disposal of the asset whose value has been artificially reduced.

There are two value

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