Finance Act 2013

16 U.K. After Schedule 4 insert—

“SCHEDULE 4ZZA U.K. relevant high value disposals: gains and losses

Introductory U.K.

1 This Schedule applies for the purposes of determining in relation to a relevant high value disposal made by a person (“P”)—

(a) whether a gain or loss which is ATED-related accrues to P on the disposal, and

(b) whether a gain or loss which is not ATED-related accrues to P on the disposal.

Assets held on 5 April 2013: no paragraph 5 election U.K.

2 If the interest disposed of was held by P on 5 April 2013—

(a) paragraph 3 applies for the purposes of computing the gain or loss accruing to P which is ATED-related, and

(b) paragraph 4 applies for the purposes of computing the gain or loss accruing to P which is not ATED-related.

3 (1) An amount equal to the relevant fraction of the notional post-April 2013 gain or loss is the ATED-related gain or loss (as the case may be).

(2) “Notional post-April 2013 gain or loss” means the gain or loss which (in the absence of section 2B and this Schedule) would have accrued on the relevant high value disposal had P acquired the interest on 5 April 2013 for a consideration equal to its market value on that date.

(3) For the purposes of sub-paragraph (2), the amount of the gain or loss accruing to P is to be computed (whether or not that would otherwise be the case) as if P were within the charge to capital gains tax (but not within the charge to corporation tax on chargeable gains).

(4) “The relevant fraction” is—

where—

“CD” is the number of days in the relevant ownership period which are ATED chargeable days;

“TD” is the total number of days in the relevant ownership period.

(5) “The relevant ownership period” means the period beginning with 6 April 2013 and ending with the day before the day on which the relevant high value disposal occurs.

(6) “ATED chargeable day” means any day by virtue of which condition C in section 2C(4) is met in relation to the relevant high value disposal.

4 (1) The gain or loss accruing on the relevant high value disposal which is not ATED-related is computed as follows.

• Step 1 Determine the amount of the notional pre-April 2013 gain or loss.

• Step 2 In a case where there is a notional post-April 2013 gain—

  (a)

  determine the amount of that gain remaining after the deduction of the ATED-related gain determined under paragraph 3, and

  (b)

  adjust that remaining gain by reducing it by the notional indexation allowance.

• Step 3 In a case where there is a notional post-April 2013 loss, determine the amount of that loss remaining after deduction of the ATED-related loss determined under paragraph 3.

• Step 4 Add—

  (a)

  the amount of any gain or loss determined under Step 1, and

  (b)

  the amount of any adjusted gain determined under Step 2 or (as the case may be) any loss determined under Step 3,

  (treating any amount which is a loss as a negative amount).

If the result is a positive amount, that amount is the gain on the relevant high value disposal which is not ATED-related.

If the result is a negative amount, that amount (expressed as a positive number) is the loss on the relevant high value disposal which is not ATED-related.

(2) “The notional pre-April 2013 gain or loss” means the gain or loss which would have accrued on 5 April 2013 had the interest been disposed of for a consideration equal to its market value on that date.

(3) For the purposes of sub-paragraph (2), the amount of the gain or loss accruing to P is to be computed (whether or not that would otherwise be the case) as if P were within the charge to corporation tax on chargeable gains (but not within the charge to capital gains tax).

(4) Paragraph 3(2) and (3) (meaning of “notional post-April 2013 gain or loss”) also applies for the purposes of this paragraph.

(5) “Notional indexation allowance” means the relevant fraction of an amount equal to the difference between—

(a) the indexation allowance which (in the absence of section 2B and this Schedule) would be made under Chapter 4 of Part 2 in determining the gain accruing on the relevant high value disposal were that gain being computed for corporation tax purposes, and

(b) the indexation allowance which is made under Chapter 4 of Part 2 in determining the notional pre-April 2013 gain.

(6) “The relevant fraction” is—

where “CD” and “TD” have the same meaning as in paragraph 3(4).

Election for paragraph 2 to 4 not to apply to a chargeable interest U.K.

5 (1) A person may make an election under this paragraph for paragraphs 2 to 4 not to apply in relation to a chargeable interest held by (or any part of which is held by) the person on 5 April 2013.

(2) An election is irrevocable.

(3) An election must be made by being included in a tax return under the Management Act for the tax year in which the first relevant high value disposal by the person of the chargeable interest (or any part of it) on or after 6 April 2013 occurs.

(4) The reference in sub-paragraph (3) to an election being included in a return includes an election being included by virtue of an amendment of the return.

(5) All such adjustments are to be made, whether by way of discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to an election.

(6) In this paragraph “chargeable interest” has the same meaning as in Part 3 of the Finance Act 2013 (annual tax on enveloped dwellings) (see section 107 of that Act).

Cases where election made or assets acquired after 5 April 2013 U.K.

6 (1) This paragraph applies if—

(a) an election is made by P under paragraph 5 in respect of the chargeable interest which (or a part of which) is the subject of the relevant high value disposal, or

(b) the chargeable interest (or part) disposed of by the relevant high value disposal was not held by P throughout the period beginning with 5 April 2013 and ending with the disposal.

(2) The ATED-related gain or loss accruing on the relevant high value disposal is computed as follows.

• Step 1 Determine the amount of the gain or loss which would accrue to P, ignoring section 2B and this Schedule (but not the remainder of this Step). For this purpose, the amount of the gain or loss is to be computed (whether or not that would otherwise be the case) as if P were within the charge to capital gains tax (but not within the charge to corporation tax on chargeable gains).

• Step 2 An amount equal to the relevant fraction of that gain or loss is the ATED-related gain or loss accruing on the relevant high value disposal.

(3) The gain or loss accruing on the relevant high value disposal which is not ATED-related is to be computed as follows.

• Step 1 In a case where there is a gain under Step 1 of sub-paragraph (2)—

  (a)

  determine the amount of the gain remaining after the deduction of the ATED-related gain, and

  (b)

  adjust the remaining gain by reducing it by an amount equal to the notional indexation allowance.

  That adjusted gain is the gain accruing on the relevant high value disposal which is not ATED-related.

• Step 2 In a case where there is a loss under Step 1 of sub-paragraph (2), determine the amount of the loss remaining after deduction of the ATED-related loss. That remaining loss is the loss accruing on the relevant high value disposal which is not ATED-related.

(4) “Notional indexation allowance” means the relevant fraction of the indexation allowance which would be made under Chapter 4 of Part 2 in determining the gain under Step 1 in sub-paragraph (2) were that gain being computed for corporation tax purposes.

(5) Subject to sub-paragraph (6), “the relevant fraction”—

(a) in sub-paragraph (2) has the same meaning as in paragraph 3(4), and

(b) in sub-paragraph (4) has the same meaning as in paragraph 4(6).

(6) For the purpose of determining the relevant fraction under sub-paragraph (5), paragraph 3(5) has effect as if the relevant ownership period began on the day on which P acquired the interest or, if later, 31 March 1982.

Adjustments of ATED chargeable days U.K.

7 (1) This paragraph applies where, as a result of a claim under section 106(3) of the Finance Act 2013 (adjustment of chargeable amount), or an amendment of or adjustment to such a claim, there is an alteration in the number of ATED chargeable days.

(2) All such adjustments are to be made, whether by way of discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to any change in liability to tax as a result of that alteration.”