Depreciatory transactions legislation meaning

Depreciatory transactions legislation describes the UK capital gains tax rules that counter “value stripping” before a share sale. In practice, the term is practitioner shorthand for the provisions in sections 176 and 177 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). The statute defines a “depreciatory transaction” and restricts any allowable loss on a later disposal of shares or securities, by a just and reasonable reduction, where earlier transactions have materially reduced the company’s value (generally looking back up to six years). Common triggers include intra‑group transfers at undervalue, distributions, or other extractions of value from the investee company or elsewhere in the group. The provisions prevent artificial shareholder‑level capital losses where value has already been removed at the asset level. These rules apply uniformly across England & Wales, Scotland and Northern Ireland, as UK‑wide corporation tax/CGT legislation. In Ireland, while there are conceptually similar CGT anti‑avoidance rules addressing loss creation and value‑shifting, the UK term “depreciatory transactions legislation” and TCGA 1992 do not apply. Irish practitioners should check the relevant provisions of the Taxes Consolidation Act 1997.