The move, one of a raft of measures designed to stymie tax avoidance, will ensure that any losses claimed are in line with the actual economic loss to the group. This change will take effect for disposals of shares or securities in a company made on or after 22 November 2017.

A depreciatory transaction is one that takes value out of shares, which might be by transferring the assets of a company to another company within a group for no or little cost. It reduces the value of the shares but without any economic loss to the group.

When the shares are disposed of (by liquidating the company or making a negligible value claim), the legislation requires that previous depreciatory transactions are adjusted for in computing any loss on disposal.

Currently there is a time limit of six years, so that depreciatory transactions before that are not taken into account.

The removal of the six year rule means that companies will need to consider the history of the shares and will be required to adjust for any prior depreciatory transactions when calculating a loss.

The measure will ensure companies cannot prevent the depreciatory transaction rules applying by holding onto a company that no longer has any value for six years before claiming an inflated amount of loss relief.

The government expects the change to generate £45m over the course of the parliament. It expects £5m in 2017-18, and £10m per year thereafter.

The policy paper can be read here.

Report by Calum Fuller