Relevant groups

In 2000 the appellant companies L and P were wholly owned subsidiaries of A. They acquired C from A for £1 each; C was at the acquisition date worthless. The next day GL an unrelated company acquired L and P for £4 million. Losses of £113.9 million crystallised under TCGA 1992 s 179 (companies leaving groups) and the appellants claimed the losses in their corporation tax self-assessment returns for the following accounting period.

Other companies in the GL group subsequently realised gains of £29 million and these were elected to L under s 171A (notional transfers within a group).

Gains of £89.4 million were made by the GH group in the year to September 2002. These were split and elected to L and P.

HMRC refused the claims so the companies appealed.

The issue arose over the proper interpretation of...