Finance Act 1994

Section 93.

SCHEDULE 12 Indexation losses: transitional relief

Introductory

1 This Schedule applies in relation to chargeable gains and allowable losses accruing to—

(a) an individual, or

(b) the trustees of a settlement made before 30th November 1993;

(referred to in this Schedule as “the taxpayer”).

2 (1) This paragraph applies for the purposes of this Schedule, and the determinations required by this paragraph to be made shall be made without regard to paragraphs 4 to 7 below.

(2) If an allowable loss accrues on a disposal made on or after 30th November 1993 and, under the old indexation rules, a greater allowable loss would have accrued, there is an indexation loss in respect of the disposal equal to the amount by which the allowable loss which would have accrued under the old indexation rules exceeds the allowable loss accruing on the disposal.

(3) If a disposal made on or after 30th November 1993 is one on which neither a gain nor a loss accrues and, under the old indexation rules, an allowable loss would have accrued, there is an indexation loss in respect of the disposal equal to the amount of the allowable loss that would have accrued under the old indexation rules.

(4) If the total amount of chargeable gains accruing to the taxpayer in any year of assessment for which this Schedule has effect exceeds the allowable losses accruing in that year, there is a relevant gain for that year equal to the amount of the excess.

3 (1) The cases in which the appropriation of an asset by the taxpayer is treated under section 161(1) of the 1992 Act (appropriations to and from stock) as a disposal of the asset include cases in which, if he had sold the asset for its market value, an allowable loss would have accrued to him under the old indexation rules.

(2) Where, but for an election under subsection (3) of section 161 of the 1992 Act—

(a) an asset appropriated by the taxpayer would have been treated as disposed of as mentioned in subsection (1) of that section, and

(b) paragraph 2(2) or (3) above would have applied on the disposal,

paragraphs 1 and 2 above and 6 and 7 below shall apply, as if the asset had been so treated, to determine for the purposes of subsection (3) of that section any increase to be made in the amount of any allowable loss; and the appropriation of the asset is referred to below as a “relevant appropriation”.

(3) Sections 574 to 576 of the Taxes Act (relief for individual on disposal of shares in qualifying trading company) shall apply if an individual who has subscribed for shares as mentioned in section 574(1) disposes of them in circumstances where paragraph 2(3) above applies as they apply in other cases.

(4) Where a person makes a claim for relief under subsection (1) of section 574 in the case of a disposal in respect of which there is an indexation loss (referred to below as a “section 574 disposal”)—

(a) paragraphs 6 and 7 below shall apply to determine any increase to be made, for the purposes of that subsection, in the amount of the allowable loss, and

(b) paragraphs 4 and 5 below shall apply to so much only of the indexation loss as is not relieved under that section.

(5) References in this paragraph and paragraphs 6 and 7 below to an increase in any loss include, in circumstances where paragraph 2(3) above applies, a reference to the creation of the loss.

Capital gains tax

4 (1) Where in the case of any taxpayer—

(a) there is a relevant gain for the year 1993-94,

(b) the relevant gain exceeds the exempt amount for that year, and

(c) there are indexation losses in respect of any disposals made in that year,

then, for the purposes of the 1992 Act, the amount by which the total amount of chargeable gains accruing to the taxpayer in that year exceeds the allowable losses accruing in the year shall be reduced by the amount mentioned in sub-paragraph (2) below, and shall be so reduced before the deduction of any allowable losses carried forward from any previous year or carried back under section 62 from any subsequent year.

(2) The amount referred to in sub-paragraph (1) above is so much of the total of indexation losses in respect of disposals made in that year as does not exceed—

(a) £10,000, or

(b) the amount by which the relevant gain exceeds the exempt amount for the year,

whichever is the smaller.

5 (1) Where in the case of any taxpayer—

(a) there is a relevant gain for the year 1994-95,

(b) the relevant gain exceeds the exempt amount for that year, and

(c) there are indexation losses in respect of any disposals made in that year or unused indexation losses for the previous year,

then, for the purposes of the 1992 Act, the amount by which the total amount of chargeable gains accruing to the taxpayer in the year 1994-95 exceeds the allowable losses accruing in that year shall be reduced by the amount mentioned in sub-paragraph (2) below, and shall be so reduced before the deduction of any allowable losses carried forward from any previous year or carried back under section 62 from any subsequent year.

(2) The amount referred to in sub-paragraph (1) above is so much of the total of indexation losses in respect of disposals made in the year 1994-95, plus any unused indexation losses for the previous year, as does not exceed—

(a) £10,000 less the aggregate of—

(i) the amount of any reduction made under paragraph 4(1) above for the previous year, and

(ii) any increase made under paragraph 6(2) below for the previous year, or

(b) the amount by which the relevant gain exceeds the exempt amount for the year 1994-95,

whichever is the smaller.

(3) For the purposes of this paragraph, if the total amount of indexation losses in respect of disposals made by the taxpayer in the year 1993-94 exceeds the aggregate of—

(a) the amount of any reduction made under paragraph 4(1) above for that year, and

(b) any increase made under paragraph 6(2) below for that year,

there are unused indexation losses for that year of an amount equal to the excess.

Income tax

6 (1) This paragraph applies where, at any time in the period beginning with 30th November 1993 and ending with 5th April 1994, the taxpayer makes any relevant appropriation or any section 574 disposal; and for the purposes of this paragraph there shall be determined—

(a) the amount of any reduction for the year 1993-94 which (disregarding relevant appropriations and section 574 disposals) would be made under paragraph 4(1) above, and

(b) the amounts of any indexation losses in respect of relevant appropriations or section 574 disposals made in that period.

(2) If the aggregate of the amounts referred to in sub-paragraph (1)(a) and (b) above does not exceed £10,000, the amount of any allowable loss referable to such an appropriation or disposal shall be increased by any indexation loss in respect of it.

(3) In any other case, notwithstanding anything in paragraphs 4 and 5 above—

(a) the aggregate of—

(i) the amount of any reduction for the year 1993-94 to be made under paragraph 4(1) above, and

(ii) the amount of any indexation losses in respect of relevant appropriations or section 574 disposals made in the period referred to in sub-paragraph (1) above,

shall be equal to £10,000 and shall be allocated as the taxpayer may determine between that reduction and increases in allowable losses referable to such appropriations or disposals, and

(b) no reduction shall be made under paragraph 5 above or 7 below for the year 1994-95.

7 (1) This paragraph applies where, at any time in the year 1994-95, the taxpayer makes any relevant appropriation or any section 574 disposal; and for the purposes of this paragraph there shall be determined—

(a) the amount of any reduction for that year which (disregarding relevant appropriations and section 574 disposals) would be made under paragraph 5(1) above, and

(b) the amounts of any indexation losses in respect of relevant appropriations or section 574 disposals made in that year.

(2) If the aggregate of the amounts referred to in sub-paragraph (1)(a) and (b) above does not exceed the limit for 1994-95, that is—

(a) £10,000, less

(b) the aggregate of the amount of any reduction made under paragraph 4(1) above for the year 1993-94 and of any increases made under paragraph 6(2) above for that year,

the amount of any allowable loss referable to such an appropriation or disposal shall be increased by any indexation loss in respect of it.

(3) In any other case, notwithstanding anything in paragraph 5 above, the aggregate of the amount of any reduction for the year 1994-95 to be made under paragraph 5(1) above and of the amount of any indexation losses in respect of relevant appropriations or section 574 disposals made in that year—

(a) shall be equal to the limit for 1994-95, and

(b) shall be allocated as the taxpayer may determine between that reduction and increases in allowable losses referable to such appropriations or disposals.

Supplementary

8 (1) In this Schedule—

• “the 1992 Act” means the [1992 c. 12.] Taxation of Chargeable Gains Act 1992, and

• “the old indexation rules” means the 1992 Act as it would have effect if—

  (a)

  the amendments made by subsections (1) to (5) of section 93 of this Act, and

  (b)

  the repeal of section 103 (collective investment schemes, etc.) and section 111 (building societies) of the 1992 Act by subsection (7) of section 93 of this Act,

  had not come into force.

(2) Other expressions not defined in this Schedule but used both in it and in the 1992 Act have the same meaning as in that Act.

(3) References in this Schedule to the reduction of any amount include its reduction to nil.