Finance Act 1989

135 Value shifting.

(1) In section 26 of the [1979 c. 14.] Capital Gains Tax Act 1979 (value shifting: further provisions) in subsection (1)(a) (schemes whereby value of the asset disposed of is materially reduced) after the words “the asset” there shall be inserted the words “or a relevant asset” and at the end of that subsection there shall be inserted—

“(1A) For the purposes of this section, where the asset disposed of by a company (“the disposing company”) consists of shares in, or securities of, another company, another asset is a relevant asset if, at the time of the disposal, it is owned by a company associated with the disposing company; but no account shall be taken of any reduction in the value of a relevant asset except in a case where—

(a) during the period beginning with the reduction in value and ending immediately before the disposal by the disposing company, there is no disposal of the asset to any person, other than a disposal falling within section 273(1) of the Taxes Act 1970 (transfers within a group: no gain/no loss),

(b) no disposal of the asset is treated as having occurred during that period by virtue of section 278 of the Taxes Act 1970 (company ceasing to be member of group), and

(c) if the reduction had not taken place but any consideration given for the relevant asset and any other material circumstances (including any consideration given before the disposal for the asset disposed of) were unchanged, the value of the asset disposed of would, at the time of the disposal, have been materially greater;

and in this subsection “securities” has the same meaning as in section 82 below.”

(2) For subsection (7) of that section there shall be substituted—

“(7) References in this section, in relation to any disposal, to a reduction in the value of an asset, where the asset consists of shares owned by a company in another company, shall be interpreted in accordance with sections 26A to 26C below and, in those sections, the disposal, the asset and those companies are referred to respectively as “the section 26 disposal”, “the principal asset”, “the first company” and “the second company”.”

(3) In subsection (8) of that section for the words “reference in subsection (1)(a)” there shall be substituted the words “references in subsections (1)(a) and (1A)”.

(4) This section shall have effect in respect of any disposal of an asset on or after 14th March 1989.