Value shifting

Produced by Tolley

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Value shifting
  • Disposals on or after 19 July 2011
  • Definitions
  • HMRC guidance
  • Disposals prior to 19 July 2011
  • Tax free benefits
  • Value shifting and distributions
  • Value shifting and asset disposals in a group

Value shifting

The value shifting rules are anti-avoidance rules which apply in specified circumstances where a tax advantage has been obtained as a result of a material reduction in asset values prior to a disposal. Where the rules apply, the chargeable gain or allowable loss that would otherwise apply is adjusted. This is unlike the depreciatory transactions provisions, which can only apply to restrict an allowable loss.

Finance Act 2011 introduced changes intended to simplify the value shifting rules which apply in respect of disposals on or after 19 July 2011. The new rules target tax driven arrangements explicitly intended to reduce the value of a company before a share sale. The main filter is whether the main purpose, or one of the main purposes, of the arrangements is to obtain a tax advantage. As a result, commercial arrangements should be out of scope of the rules for disposals on or after 19 July 2011.

This guidance note explains both the current Finance Act 2011 rules which apply to disposals taking place on or after 19 July 2011 and the previous rules.

See also the Value shifting video for details of the value shifting regime, together with worked examples.

Disposals on or after 19 July 2011

Following consultation, the previous complicated value shifting rules were amended by Finance Act 2011 for disposals on or after 19 July 2011. The scope of the amended rules is restricted to instances where companies have entered into tax motivated arrangements with the intention of reducing the tax liability on

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