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Depreciatory transactions

N Ltd paid £600,000 for the shares of A Ltd, B Ltd and M Ltd. These companies had trades the same as part of N Ltd and little else in the way of assets. Immediately on purchase the trades were transferred into N Ltd at no cost. Some years later the subsids were disposed of and the Revenue denied a claim for losses on disposal of the shares as the transfer of trades was a depreciatory transaction. At around the same time, N Ltd sold its trade realising a large gain. It then continued to trade in other, previously comparatively minor areas. Can the costs of the subsidiaries now be set against the gain on the disposal of the trade? There is no chance at present of the shares in N (itself a subsidairy) being sold.
Philip Cragg

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Which costs? Can a degrouping charge help??
What is being asked appears to be this. The loss of value on selling shares in the subs. was the consequence of a "depreciatory transaction". The other side of that transaction was the transfer at an undervalue of the goodwill of the subs. to the parent. The parent has now sold the trade , the costs of acquiring which did not include the true value of the transferred goodwill.
The question appears to ask "Can we impute the true value of the goodwill when acquired to the parent in computing its chargeable gain, as to that extent the loss on selling the subs. was restricted?"

There does not seem to be any mechanism for this.If the original transfer was within six years of the sale of the subs, you may have an automatic deemed disposal by parent of the acquired goodwill.A degrouping charge is not limited to an"envelope" sub. That might have given a small chargeable gain at the time, but enables you to rebase the goodwill transferred , at the value at the date of the transfer, the revaluation deemd to have taken place at the date the parent left the group consisting of the subs and the parent. .
A long shot, true, but might be worth investigating.

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