Income Tax (Trading and Other Income) Act 2005 Explanatory Notes

Paragraph 438: section 151C of TCGA

3499.This new section of TCGA provides that where a capital loss accrues as part of any scheme or arrangement which has an unallowable purpose that loss is disregarded. Schedule 13 to FA 1996, relevant discounted securities, is rewritten in Chapter 8 of Part 4 of this Act. Because this paragraph of the Schedule deals with capital losses on such securities it is more appropriate to TCGA. The section is based on paragraph 14C of Schedule 13 to FA 1996.

3500.Subsection (1)(b) requires payment to be made other than for the acquisition or disposal of a strip – these payments will typically be payments under option agreements. An allowable loss may accrue on a payment while a comparable gain on a strip escapes tax under section 115 of TCGA. “Disposal” in this subsection takes the meaning in Chapter 8 of Part 4 of this Act (subsection (4)).

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