EWCA Civ 118 (2010) Kellogg Brown & Root Holdings (UK) Ltd v HMRC

Connected party losses - HMRC won

Case Summary:

S18 TCGA 1992 restricts the offset of losses on transactions between connected persons to gains made on transactions between these connected persons.

The key statute in this case was S286 TCGA 1992 and in particular the meaning of the word “group” in section 286(b). It was decided it should be given its “ordinary meaning” which “is satisfied by a common relation without any requirement for a common purpose.”

There was a substantial identity between the ownerships of the two companies, both were controlled by the same group of persons and so the losses could not be set against general gains.