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U.K.

Taxation of Chargeable Gains Act 1992

1992 CHAPTER 12

An Act to consolidate certain enactments relating to the taxation of chargeable gains.

[6th March 1992]

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

Modifications etc. (not altering text)

C1Act applied (with modifications) by S.I. 1992/415, reg. 3 (with regs. 4-7)

Power to extend conferred (27.7.1993 with application as mentioned in s. 165(1) of the amending Act) by 1993 c. 34, s. 134, Sch. 15 para. 4(10)

Power to extend conferred (27.7.1993 with application as mentioned in s. 165(1) of the amending Act) by 1993 c. 34, s. 165, Sch. 16 para. 3(3)(b)

Act modified (27.7.1993 with application as mentioned in s. 165(1) of the amending Act) by 1993 c. 34, s. 169, Sch. 17 paras. 2(1), 4(1)

C2Act modified (retrospective to 11.1.1994) by Finance Act 1994 (c. 9), Sch. 24 paras. 2(1), 9(1)(6)-(8), 11(4)

C3Act applied (with effect in accordance with reg. 1(1) of the amending S.I.) by The Lloyds Underwriters (Tax) (1991-92) Regulations 1994 (S.I. 1994/728), reg. 3(1) (with reg. 1(2))

C4Act modified (3.5.1994) by Finance Act 1994 (c. 9), s. 173(2)(c) (with s. 173(1))

C5Act applied (3.5.1994) by Finance Act 1994 (c. 9), Sch. 25 para. 1(2)

C6Act modified (19.9.1994) by Coal industry Act 1994 (c. 21), Sch. 4 paras. 2(1), 9(1) (with Sch. 4 para. 14); S.I. 1994/2189, art. 2, Sch.

C7Act modified (retrospective to 29.11.1994) by Finance Act 1995 (c. 4), s. 154(1)(3)

C10Act modified by Income and Corporation Taxes Act 1988 (c. 1), s. 737C(11A) (as inserted (with effect in accordance with s. 80(5) of the amending Act) by Finance Act 1995 (c. 4), s. 80(3))

C11Act applied by Income and Corporation Taxes Act 1988 (c. 1), Sch. 15B para 8(5) (as inserted (1.5.1995) by Finance Act 1995 (c. 4), s. 71(2), Sch. 15)

C12Act modified (with effect in accordance with s. 126(9) of the amending Act) by Finance Act 1995 (c. 4), s. 126, Sch. 23 para. 1(1)

C13Act modified (with effect in accordance with s. 103(7) of the amending Act) by Finance Act 1995 (c. 4), s. 113(2)

C14Act modified (retrospective to 31.12.1995) by Finance Act 1996 (c. 8), s. 203(10)

C15Act extended (with modifications) and applied (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), s. 92(4)-(6) (with Sch. 10, Sch. 11, Sch. 15)

C16Act extended and applied (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), s. 93(4)-(13) (with Sch. 10, Sch. 11, Sch. 15)

C17Act modified (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), s. 98, Sch. 10 para. 5(4)

C18Act applied (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), s. 102, Sch. 13 paras. 13(6), 15(1)

C19Act applied (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), s. 105, Sch. 15 paras. 8(11), 22(4), 26(2)

C21Act applied (with modifications) (28.4.1997) by The Open-ended Investment Companies (Tax) Regulations 1997 (S.I. 1997/1154), regs. 3-8 (with regs. 20-23) (as amended (8.8.1997) by S.I. 1997/1715, regs. 1, 3-5; (1.10.2002) S.I. 2002/1973, regs. 1(2), 2)

C23Act modified by Finance Act 1996 (c. 8), s. 92(7)-(11) (as inserted (with effect in accordance with s. 65(8) of the amending Act) by Finance Act 1999 (c. 16), s. 65(7))

C25Act applied (with effect in accordance with s. 63(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 15 para. 96(1)(2)

C26Act applied (with modifications) (6.11.2000) by Postal Services Act 2000 (c. 26), Sch. 4 para. 7; S.I. 2000/2957, art. 2(1), Sch. 1

C28Act modified (15.1.2001) by Transport Act 2000 (c. 38), Sch. 26 paras. 9, 12(2), 26(2), 33(2); S.I. 2000/3376, art. 2

C29Act applied by Finance Act 1996 (c. 8), s. 92(10A) (as inserted (with effect in accordance with s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), Sch. 23 para. 5(6))

C30Act modified by Finance Act 1996 (c. 8), s. 93B(2) (as inserted (with effect in accordance with Sch. 11 paras. 7, 18 of the amending Act) by Finance Act 2002 (c. 23), s. 77(1) (with s. 77(2)))

C31Act applied (with modifications) (with effect in accordance with s. 58(3) of the amending Act) by Finance Act 2002 (c. 23), Sch. 18 para. 10

C32Act applied (with effect in accordance with s. 83(3) of the amending Act) by Finance Act 2002 (c. 23), Sch. 26 para. 48(9)

C33Act applied (with effect in accordance with s. 84(1) of the amending Act) by Finance Act 2002 (c. 23), Sch. 29 paras. 130(3)-(5)(7), 131(5)

C34Act modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Exchange Gains and Losses (Bringing into Account Gains or Losses) Regulations 2002 (S.I. 2002/1970), reg. 4(1) (with regs. 6, 8)

C35Act applied (22.7.2004) by Finance Act 2004 (c. 12), s. 133(2)(10)

C36Act applied (22.7.2004) by Finance Act 2004 (c. 12), Sch. 23 para. 10(4)

C37Act modified (22.7.2004) by Finance Act 2004 (c. 12), Sch. 36 para. 2(5) (with s. 283(5), Sch. 36)

C38Act modified by Income and Corporation Taxes Act 1988 (c. 1), s. 763(6A) (as inserted (with effect in accordance with s. 145(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 26 para. 15(2) (with Sch. 26 para. 17))

C39Act construed as one with Finance Act 1993 (c. 34), Sch. 20A para. 5(3) (as inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 25 para. 3)

C40Act modified (with effect in accordance with reg. 1 of the amending S.I.) by The Overseas Life Insurance Companies Regulations 2004 (S.I. 2004/2200), reg. 7

C42Act modified (with effect in accordance with s. 56 of the amending Act) by Finance Act 2005 (c. 7), s. 53

C43Act construed as one with Finance Act 2005 (c. 7), ss. 30-33, Sch. 1 by Finance Act 2005 (c. 7), s. 41(3) (with s. 45)

C45Act modified by Finance Act 1996 (c. 8), s. 91G(1)(2) (as inserted (with effect in accordance with Sch. 7 para. 10(7) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 10(6))

C46Act modified (E.W.S.) (24.7.2005) by Railways Act 2005 (c. 14), s. 60(2), Sch. 10 para. 27; S.I. 2005/1909, art. 2, Sch.

C47Act modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Pension Protection Fund (Tax) (2005-06) Regulations 2005 (S.I. 2005/1907), reg. 11

C48Act applied (with modifications) by Finance Act 2004 (c. 36), s. 185G (as inserted (6.4.2006) by Finance Act 2006 (c. 25), s. 158(2), Sch. 21 para. 6)

C50Act construed as one with Finance Act 2006 (c. 25), ss. 124-126 (19.7.2006) by Finance Act 2006 (c. 25), s. 127

C51Act modified (with effect in accordance with reg. 1 of the amending S.I.) by The Overseas Life Insurance Companies Regulations 2006 (S.I. 2006/3271), regs. 27-32

C53Act modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 paras. 11, 12, 22

C54Act construed as one with Crossrail Act 2008 (c. 18), Sch. 13 (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 3(3)

C60Act modified (15.11.2011 for specified purposes, 30.3.2012 for E.W.) by Localism Act 2011 (c. 20), s. 240(5)(o), Sch. 24 para. 6(1); S.I. 2012/628, art. 3(b)

C62Act modified (with effect in accordance with reg. 1(2) of the affecting S.I.) by The Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964), regs. 97-110 (as amended (8.6.2013) by S.I. 2013/1400, reg. 14)

C66Act modified (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 8 para. 41(8)

C67Act modified (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 123(4)(5)

C68Act modified by Corporation Tax Act 2010 (c. 4), s. 535A(9) (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 115)

C69Act modified (12.2.2019) by Finance Act 2019 (c. 1), Sch. 2 para. 17(3)

Commencement Information

I1Act partly in force at Royal Assent and otherwise in force or coming into force as mentioned in s.289.

[F1Part 1U.K.Capital gains tax and corporation tax on chargeable gains

Textual Amendments

F1Pt. 1 substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 2

Chapter 1U.K.Capital gains tax

Charge to capital gains taxU.K.

1Capital gains taxU.K.

(1)Capital gains tax is charged for a tax year on chargeable gains accruing in the year to a person on the disposal of assets.

(2)As a result of section 4 of CTA 2009, capital gains tax is not charged on gains accruing to a company, but corporation tax is chargeable instead in accordance with—

(a)section 2 of CTA 2009,

(b)Chapter 2 of this Part, and

(c)other relevant provisions of the Corporation Tax Acts.

(3)Capital gains tax is charged on the total amount of chargeable gains accruing to a person in a tax year after deducting—

(a)any allowable losses accruing to the person in the tax year, and

(b)so far as not previously deducted under this subsection, any allowable losses accruing to the person in any previous tax year.

Territorial scope of chargeU.K.

1ATerritorial scopeU.K.

(1)A person who is UK resident for a tax year is chargeable to capital gains tax on chargeable gains accruing to the person in the tax year on the disposal of assets wherever situated.

(2)In the case of individuals who are UK resident for a tax year, see also—

(a)Schedule 1 (foreign gains accruing to individuals to whom the remittance basis applies),

(b)section 1G (cases where the tax year is a split year),

(c)sections 1M and 1N (temporary periods of non-residence),

(d)Chapter 3 (gains of non-UK resident close companies attributed to individuals), and

(e)sections 86, 87, 87K, 87L and 89(2) (gains of non-UK resident trustees attributed to individuals).

(3)A person who is not UK resident for a tax year is chargeable to capital gains tax on chargeable gains accruing to the person in the tax year on the disposal of—

(a)assets situated in the United Kingdom that have a relevant connection to the person's UK branch or agency and are disposed of at a time when the person has that branch or agency (see section 1B),

(b)assets not within paragraph (a) that are interests in UK land (see section 1C), and

(c)assets (wherever situated) not within paragraph (a) or (b) that derive at least 75% of their value from UK land where the person has a substantial indirect interest in that land (see section 1D and Schedule 1A).

(4)For the purposes of this Chapter a person is “UK resident” for a tax year if the person is resident in the United Kingdom during any part of the tax year.

(5)For the relevant residence rules—

(a)in the case of individuals, see Schedule 45 to the Finance Act 2013 (which provides that individuals meeting the applicable tests for a tax year are taken to be resident for the whole of the year),

(b)in the case of the personal representatives of deceased individuals, see section 62(3), and

(c)in the case of trustees of settlements, see section 69.

1BNon-UK residents: UK branch or agencyU.K.

(1)For the purposes of section 1A(3)(a) a person has a UK branch or agency at any time if, at that time, the person carries on a trade, profession or vocation in the United Kingdom through a branch or agency there.

(2)For the purposes of section 1A(3)(a) an asset has a relevant connection to a person's UK branch or agency if—

(a)it is, or was, used in or for the purposes of the trade, profession or vocation at or before the time of the disposal,

(b)it is, or was, used or held for the purposes of the branch or agency at or before that time, or

(c)it is acquired for use by or for the purposes of the branch or agency.

(3)Section 1A(3)(a) does not apply to a person who, as a result of Part 2 of TIOPA 2010 (double taxation arrangements), is exempt from income tax for the tax year in respect of the profits or gains of the branch or agency.

(4)In the case of a profession or vocation carried on by a person, an asset does not have a relevant connection to the person's UK branch or agency if—

(a)the asset was only used in or for the purposes of the profession or vocation before 14 March 1989, or

(b)the asset was only used or held for the purposes of the branch or agency before that date.

(5)In this Act, unless the context otherwise requires, “branch or agency”—

(a)means any factorship, agency, receivership, branch or management, but

(b)does not include any person within any of the exemptions under sections 835G to 835K of ITA 2007 (persons who are not UK representatives).

1CNon-UK residents: disposing of an “interest in UK land”U.K.

(1)For the purposes of section 1A(3)(b) an “interest in UK land” means—

(a)an estate, interest, right or power in or over land in the United Kingdom, or

(b)the benefit of an obligation, restriction or condition affecting the value of an estate, interest, right or power in or over land in the United Kingdom,

other than an excluded interest.

(2)The following interests are “excluded interests”—

(a)any interest or right held for securing the payment of money or the performance of any other obligation,

(b)a licence to use or occupy land,

(c)in England and Wales or Northern Ireland, a tenancy at will or an advowson, franchise or manor, and

(d)such other descriptions of interest or right in relation to land in the United Kingdom as may be specified in regulations made by the Treasury.

(3)An interest or right is not within subsection (2)(a) if it is—

(a)a rentcharge, or

(b)in Scotland, a feu duty or a payment mentioned in section 56(1) of the Abolition of Feudal Tenure etc (Scotland) Act 2000.

(4)The grant of an option by a person binding the person to dispose of an interest in UK land is (so far as it would not otherwise be the case) regarded as a disposal of an interest in UK land by the person for the purposes of section 1A(3)(b).

(5)This does not affect the operation of section 144 in relation to the grant of the option (or otherwise).

(6)In this section—

1DNon-UK residents: assets deriving 75% of value from UK land etcU.K.

(1)For the purposes of section 1A(3)(c) the following questions are determined in accordance with the provision made by Schedule 1A—

(a)whether the asset being disposed of derives at least 75% of its value from UK land, and

(b)whether the person making the disposal has a substantial indirect interest in the UK land at the time of the disposal.

(2)The provision made by Schedule 1A is not to be taken as affecting the meaning of “substantial” in other contexts.

Deduction of allowable lossesU.K.

1ELosses deductible only when within scope of tax etcU.K.

(1)A loss is not an allowable loss if it accrues in a tax year at a time when, had a gain accrued instead, the gain would not have been chargeable to capital gains tax under this Act for the tax year (and see also sections 16(2) and 16A).

(2)In addition, the only allowable losses that qualify for deduction from chargeable gains under section 1A(3) (non-UK residents) are those accruing to the person on disposals of assets within that subsection.

(3)An allowable loss counts for the purposes of subsection (2) even if it accrues in a tax year in which the person was UK resident.

(4)No allowable losses may be deducted from chargeable gains treated as accruing to an individual as a result of section 87, 87K, 87L or 89(2) (read, where appropriate, with section 1M).

(5)If—

(a)amounts (or elements of amounts) treated as accruing to an individual as a result of section 86 relate to different settlements, and

(b)the deduction of allowable losses does not reduce the amounts or elements to nil,

the deduction applicable to each amount is the proportion that the amount concerned bears to the total of the amounts.

(6)The deduction of allowable losses also has effect subject to Schedule 1 (UK resident individuals not domiciled in UK).

(7)For the only case in which an allowable loss accruing in a tax year may be carried back to an earlier tax year, see section 62 (death).

1FAllowable losses to be used in most beneficial way etcU.K.

(1)Allowable losses may (subject to express provision to the contrary) be deducted from gains in whichever way is most beneficial to a person chargeable to capital gains tax.

(2)Accordingly, an allowable loss may be deducted from a chargeable gain irrespective of the rate of tax at which the gain would otherwise have been charged.

(3)Allowable losses that are deducted from gains may not be deducted any further than is necessary to eliminate the gains.

(4)No part of an allowable loss may be relieved under this Act more than once.

(5)So far as an amount has been relieved under the Income Tax Acts, it may not be further relieved under this Act.

UK resident individuals with split tax yearsU.K.

1GGains accruing to UK resident individuals in split yearsU.K.

(1)If, as respects any individual, a tax year is a split year, sections 1A(1) and 1E have effect subject to the modifications made by this section.

(2)Gains accruing to the individual in the overseas part of the tax year are chargeable to capital gains tax only if they accrue on the disposal of assets within section 1A(3).

(3)Losses are deductible from gains accruing to the individual in the overseas part of the tax year on the disposal of assets within section 1A(3)(b) or (c) only if the losses accrue to the individual on the disposal of—

(a)assets that are within section 1A(3)(b) or (c), or

(b)assets that would be within section 1A(3)(b) or (c) if they did not have a relevant connection to the individual's UK branch or agency.

(4)But losses accruing in the overseas part of the tax year on disposals of assets within section 1A(3)(b) or (c) are (so far as not deducted as mentioned in subsection (3)) deductible from gains accruing in the UK part of the tax year.

Rates of CGTU.K.

1HThe main rates of CGTU.K.

(1)This section makes provision about the rates at which capital gains tax is charged but has effect subject to—

(a)section 169N ([F2business asset disposal relief]: rate of 10%), and

(b)section 169VC (investors' relief: rate of 10%).

(2)Chargeable gains accruing in a tax year to an individual that are—

(a)residential property gains (see Schedule 1B), or

(b)carried interest gains (see subsections (9) to (11)),

are charged to capital gains tax at a rate of 18% or 28%.

(3)Other chargeable gains accruing in a tax year to an individual are charged to capital gains tax at a rate of 10% or 20%.

(4)The question as to which of the rates applies to the gains concerned is determined by section 1I (income taxed at higher rates or gains exceeding unused basic rate band).

(5)Chargeable gains accruing in a tax year to the personal representatives of a deceased individual that are—

(a)residential property gains, or

(b)carried interest gains,

are charged to capital gains tax at a rate of 28%.

(6)Other chargeable gains accruing in a tax year to the personal representatives of a deceased individual are charged to capital gains tax at a rate of 20%.

(7)Residential property gains accruing in a tax year to the trustees of a settlement are charged to capital gains tax at a rate of 28%.

(8)Other chargeable gains accruing in a tax year to the trustees of a settlement are charged to capital gains tax at a rate of 20%.

(9)For the purposes of this section chargeable gains are “carried interest gains” if they accrue to an individual (“X”)—

(a)under section 103KA(2) or (3) (investment management services), or

(b)as a result of carried interest arising to X under arrangements not involving a partnership under which X performs investment management services directly or indirectly in respect of an investment scheme.

(10)A gain is not a carried interest gain under subsection (9)(b) if the carried interest constitutes a co-investment repayment or return.

(11)Expressions used in subsection (9) or (10) have the same meaning as they have in Chapter 5 of Part 3.

Textual Amendments

F2Words in Act substituted (with effect for the tax year 2020-21 and subsequent tax years) by Finance Act 2020 (c. 14), Sch. 3 paras. 7(2)(a), 8 (with Sch. 3 para. 7(3))

1IIncome taxed at higher rates or gains exceeding unused basic rate bandU.K.

(1)If any of an individual's income for a tax year is chargeable to income tax at a higher income tax rate, gains accruing to the individual in the tax year are charged—

(a)at the rate of 28%(if they are residential property gains or carried interest gains), or

(b)at the rate of 20% (if they are other kinds of gains).

(2)If—

(a)none of an individual's income for a tax year is chargeable to income tax at a higher income tax rate, but

(b)the individual is chargeable to capital gains tax for the tax year on an amount that exceeds the unused part of the individual's basic rate band,

the excess (“the higher rate excess”) is charged at the rate of 28%(so far as comprising residential property gains or carried interest gains) or at the rate of 20% (so far as comprising other kinds of gains).

(3)The remainder of this section sets out special rules which apply depending on the nature of the gains within subsection (2)(b).

(4)If—

(a)the gains consist of or include gains (“entrepreneur or investor gains”) chargeable at the rate of 10% under section 169N(3) or 169VC(2), and

(b)the total amount of the entrepreneur or investor gains exceeds the unused part of the individual's basic rate band,

that unused part is used fully against those gains.

(5)The effect of so doing is that other gains comprised in the higher rate excess are then charged—

(a)at the rate of 28%(if they are residential property gains or carried interest gains), or

(b)at the rate of 20% (if they are other kinds of gains).

(6)If the total amount of the entrepreneur or investor gains does not exceed the unused part of the individual's basic rate band—

(a)so much of that unused part as is equal to that total amount is used against those gains, and

(b)accordingly, the higher rate excess consists only of gains other than entrepreneur or investor gains.

(7)The individual may allocate so much of the unused part of the individual's basic rate band as then remains to—

(a)any residential property gains or carried interest gains, or

(b)any other gains.

(8)The effect of the allocation is that the gains to which the allocation is made are charged—

(a)at the rate of 18%(if they are residential property gains or carried interest gains), or

(b)at the rate of 10% (if they are other kinds of gains).

(9)Any gains to which no allocation is made are charged—

(a)at the rate of 28%(if they are residential property gains or carried interest gains), or

(b)at the rate of 20% (if they are other kinds of gains).

1JSection 1I: definitions and other supplementary provisionU.K.

(1)For the purposes of section 1I—

(2)If an individual is entitled to relief for a tax year under section 539 of ITTOIA 2005 (contracts for life insurance) by reference to the amount of a deficiency, the individual's Step 3 income for the tax year is treated for the purposes of this section as reduced by the amount of the deficiency.

(3)If, as a result of section 669(1) and (2) of ITTOIA 2005 (inheritance tax on accrued income), there is a reduction in the residuary income of an estate for a tax year that reduces an individual's income by any amount, the individual's Step 3 income for the tax year is treated for the purposes of this section as reduced by the amount of that reduction in the individual's income.

(4)If an individual has life insurance gains for a tax year, the individual's Step 3 income for the tax year is treated for the purposes of this section as if the amount of those gains were limited to—

(a)the annual equivalent within the meaning of section 536(1) of ITTOIA 2005, or

(b)the total annual equivalent within the meaning of section 537 of that Act,

as the case may be.

(5)If—

(a)an individual has life insurance gains for a tax year,

(b)relief is given under section 535 of ITTOIA 2005 for the tax year, and

(c)the calculation under section 536(1) or 537 of that Act for the tax year does not involve the higher rate,

the individual is treated for the purposes of section 1I as if none of the individual's income were chargeable to income tax at the higher rate, the default higher rate or the dividend upper rate.

(6)In the application of section 1I in the case of any individual it is to be assumed that the individual is not a Scottish or Welsh taxpayer.

(7)In this section—

(8)Expressions used in this section which have a meaning when used in the Income Tax Acts have the same meaning in this section.

Annual exempt amountU.K.

1KAnnual exempt amountU.K.

(1)If an individual is (or, apart from this section, would be) chargeable to capital gains tax for a tax year on chargeable gains, the annual exempt amount for the year is to be deducted from those gains (but no further than necessary to eliminate them).

(2)The annual exempt amount for a tax year is £12,000.

(3)The annual exempt amount may not be deducted from chargeable gains to which paragraph 2 of Schedule 1 applies (foreign gains of non-UK domiciled individuals accruing in one year and remitted in later year).

(4)The deduction of the annual exempt amount—

(a)is made after the deduction of allowable losses accruing in the tax year, but

(b)is made before the deduction of allowable losses accruing in a previous tax year or, if section 62 applies, in a subsequent tax year.

(5)The annual exempt amount may be deducted from gains in whatever way is most beneficial to a person chargeable to capital gains tax (irrespective of the rate of tax at which the gains would otherwise have been charged).

(6)An individual is not entitled to an annual exempt amount for a tax year if section 809B of ITA 2007 (claim for remittance basis) applies to the individual for the year.

(7)For the tax year in which an individual dies and for the next two tax years, this section applies to the individual's personal representatives as if references to the individual were to those personal representatives.

(8)This section applies in relation to trustees in accordance with the provision made by Schedule 1C.

1LIncreasing annual exempt amount to reflect increases in CPIU.K.

(1)If the consumer prices index for the September before the start of a tax year is higher than it was for the previous September—

(a)the annual exempt amount is increased by the same percentage as the rise in that index (rounded up to the nearest £100), and

(b)section 1K(2) has effect for the tax year (and subsequent tax years) as if it referred to the increased amount.

(2)If, as a result of this section, the annual exempt amount for a tax year increases, the Treasury must before the start of the tax year make an order showing the increased amount.

Temporary periods of non-residenceU.K.

1MTemporary non-residentsU.K.

(1)If, in the case of the disposal of an asset by an individual who is temporarily non-resident—

(a)a gain or loss accrues to the individual in the temporary period of non-residence, and

(b)the asset is not excluded from this subsection by section 1N (certain assets acquired in that period),

the gain or loss is treated instead as accruing to the individual in the period of return.

(2)If—

(a)a gain is, as a result of subsection (1), treated as accruing to an individual in a tax year for which the remittance basis applies to the individual,

(b)the tax year consists of or includes the period of return, and

(c)the gain was remitted to the United Kingdom in the temporary period of non-residence,

the gain is treated instead as remitted to the United Kingdom in the period of return.

(3)If—

(a)an individual is temporarily non-resident, and

(b)a gain would, as a result of section 86, have accrued to the individual in a tax year falling wholly or partly in the temporary period of non-residence if the individual had been resident in the United Kingdom for that year,

the gain is treated instead as accruing to the individual in the period of return (but see also section 86A).

(4)Nothing in any double taxation arrangements prevents a charge to capital gains tax arising as a result of this section.

(5)Nothing in this section is to affect a gain or loss which, apart from this section, would be chargeable to capital gains tax or would be an allowable loss.

(6)For the purposes of this section each of the following expressions has the meaning given by Part 4 of Schedule 45 to the Finance Act 2013 (statutory residence test: anti-avoidance)—

(7)In this section the reference to “the remittance basis” applying to an individual for a tax year is to section 809B, 809D or 809E of ITA 2007 applying to the individual for the year.

1NSection 1M(1): assets acquired in temporary period of non-residenceU.K.

(1)An asset is excluded from section 1M(1) if—

(a)it was acquired by the individual in the temporary period of non-residence,

(b)the acquisition was otherwise than by means of a disqualifying no gain/no loss disposal,

(c)there is no reduction in the consideration for the acquisition under section 23(4)(b) or (5)(b), 152(1)(b), 153(1)(b), 162(3)(b) or 247(2)(b) or (3)(b) by reference to a UK resident disposal, and

(d)the asset is not an interest created by or arising under a settlement.

(2)This exclusion does not apply in the case of an asset (“the new asset”) if—

(a)on a disposal of the new asset a gain or loss is treated as a result of 116(10) or (11), 134 or 154(2) or (4) as accruing (ignoring section 1M),

(b)the gain or loss is calculated by reference to another asset (“the old asset”), and

(c)the new asset is one that meets the conditions for exclusion but the old asset does not.

(3)For the purposes of this section “a UK resident disposal” means a disposal by a person (“P”) of an asset which was acquired by P at a time when—

(a)P was resident in the United Kingdom, and

(b)P was not Treaty non-resident.

(4)For the purposes of this section “a disqualifying no gain/no loss disposal” means a UK resident disposal to which section 58, 73 or 258(4) applies.

InterpretationU.K.

1ODefinitions used in ChapterU.K.

In this Chapter any reference to a person who is, or is not, “UK resident” is to be read in accordance with section 1A(4).

Chapter 2U.K.Corporation tax on chargeable gains

Corporation tax on chargeable gains: the general schemeU.K.

2Corporation tax on chargeable gainsU.K.

(1)As a result of section 2(1) and (2) of CTA 2009, corporation tax is charged on chargeable gains accruing to a company on the disposal of assets.

(2)The charge to corporation tax on chargeable gains has effect in accordance with this Act and all other relevant provisions of the Corporation Tax Acts.

2ACompany's total profits to include chargeable gainsU.K.

(1)The amount of chargeable gains to be included in a company's total profits for an accounting period is the total amount of chargeable gains accruing to the company in the period after deducting—

(a)any allowable losses accruing to the company in the period, and

(b)so far as not previously deducted under this subsection, any allowable losses previously accruing to the company while it was within the charge to corporation tax.

(2)For the purposes of corporation tax on gains “allowable loss” does not include a loss accruing to a company if, had a gain accrued, the company would not have been chargeable to corporation tax on the gain.

[F3(3)Subsection (4) applies if—

(a)a company has two or more accounting periods that fall wholly within the same financial year,

(b)the company is chargeable to corporation tax for each of those accounting periods only because of a chargeable gain accruing to the company on the disposal of asset, and

(c)in the period (if any) between each of those accounting periods, the company is not within the charge to corporation tax.]

Textual Amendments

F3S. 2A(3)(4) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 39, 42 (with Sch. 4 paras. 43-46)

Modifications etc. (not altering text)

C70S. 2A applied (with modifications) (with effect in accordance with Sch. 4 para. 43(1) of the amending Act) by Finance Act 2020 (c. 14), Sch. 4 para. 44(2)(3)

C71S. 2A(1)(a) modified (with application in accordance with Sch. 4 para. 45(1)(2) of the amending Act) by Finance Act 2020 (c. 14), Sch. 4 para. 45(3)

C72S. 2A(1)(b) modified (retrospective to 29.10.2018) by Finance Act 2020 (c. 14), Sch. 4 para. 46

Territorial scopeU.K.

2BTerritorial scope of charge to corporation tax on chargeable gainsU.K.

(1)A company which is resident in the United Kingdom in an accounting period is chargeable to corporation tax on chargeable gains accruing to the company in the period on the disposal of assets wherever situated.

(2)This is subject to Chapter 3A of Part 2 of CTA 2009 (exemption from charge in respect of profits of foreign permanent establishments).

(3)A company which is not resident in the United Kingdom is chargeable to corporation tax on chargeable gains that—

(a)accrue to the company on the disposal of assets situated in the United Kingdom that have a relevant connection to the company's UK permanent establishment (see section 2C),

(b)accrue at a time when it has that permanent establishment, and

(c)are, in accordance with sections 20 to 32 of CTA 2009, attributable to that permanent establishment.

(4)In addition, a company which is not resident in the United Kingdom is chargeable to corporation tax on chargeable gains accruing to the company on the disposal of assets not within subsection (3) that are—

(a)interests in UK land, or

(b)assets (wherever situated) not within paragraph (a) that derive at least 75% of their value from UK land where the company has a substantial indirect interest in that land.

(5)Section 1C applies for the purposes of subsection (4)(a) as it applies for the purposes of section 1A(3)(b) (disposing of interests in UK land).

(6)The reference in subsection (4)(b) to assets deriving at least 75% of their value from UK land where the company has a substantial indirect interest in that land is to be read in accordance with Schedule 1A.

2CNon-UK resident company with UK permanent establishmentU.K.

(1)For the purposes of section 2B(3) a company has a UK permanent establishment at any time if, at that time, the company carries on a trade in the United Kingdom through a permanent establishment there.

(2)For the purposes of section 2B(3) an asset has a relevant connection to a company's UK permanent establishment if—

(a)it is, or was, used in or for the purposes of the trade at or before the time of the disposal,

(b)it is, or was, used or held for the purposes of the permanent establishment at or before that time, or

(c)it is acquired for use by or for the purposes of the permanent establishment.

(3)Section 2B(3) does not apply to a company which, as a result of Part 2 of TIOPA 2010 (double taxation arrangements), is exempt from corporation tax for the accounting period in respect of the profits of the permanent establishment.

(4)In the case of the long-term business of an overseas life insurance company, subsection (2) has effect as if for paragraph (b) there were substituted—

(b)it is, or was, used or held for the purposes of the permanent establishment at or before that time (irrespective of where it is situated at that time),.

(5)In this section references to a trade include an office and references to carrying on a trade include holding an office.

Application of CGT principles etcU.K.

2DApplication of CGT principles in calculating gains and lossesU.K.

(1)The total amount of chargeable gains to be included in a company's total profits for an accounting period is calculated for corporation tax purposes in accordance with capital gains tax principles.

(2)All of the following questions are determined in accordance with the enactments relating to capital gains tax as if accounting periods were tax years—

(a)any question as to the amounts to be, or not to be, taken into account as chargeable gains or allowable losses,

(b)any question as to the amounts to be, or not to be, taken into account in calculating gains or losses,

(c)any question as to the amounts charged to tax as a company's gains, and

(d)any question as to the time when any amount is treated as accruing.

(3)This section is subject to any provision made elsewhere by the Corporation Tax Acts.

2EReferences to income tax or Income Tax Acts in case of companiesU.K.

(1)If the CGT enactments contain any reference to—

(a)income tax, or

(b)the Income Tax Acts,

the reference is, in relation to a company, to be read as a reference to corporation tax or the Corporation Tax Acts.

(2)But—

(a)this does not affect references to income tax in section 39(2), and

(b)so far as the CGT enactments operate by reference to matters of any specified description, account is to be taken for corporation tax purposes of matters of that description confined to companies but not of any confined to individuals.

(3)In this section “the CGT enactments” means the enactments relating to capital gains tax.

2FInteraction of capital gains tax and corporation taxU.K.

(1)This Act as it has effect in accordance with this Chapter is not to be affected in its operation by the fact that capital gains tax and corporation tax are distinct taxes.

(2)But this Act is, so far as it is consistent with the Corporation Tax Acts, to apply in relation to capital gains tax and corporation tax on gains as if they were one tax.

(3)Accordingly, a matter which in a case involving two individuals is relevant to both of them in relation to capital gains tax is in a similar case involving an individual and a company—

(a)relevant to the individual in relation to capital gains tax, and

(b)relevant to the company in relation to corporation tax.

SupplementaryU.K.

2GAssets of a company vested in a liquidatorU.K.

(1)If assets of a company are vested in a liquidator—

(a)this Chapter, and

(b)the enactments applied by this Chapter,

apply as if the assets were vested in the company and as if the acts of the liquidator in relation to the assets were the company's acts.

(2)Accordingly, acquisitions from or disposals to the liquidator by the company are ignored.

(3)The assets may be vested in the liquidator under section 145 of the Insolvency Act 1986 or Article 123 of the Insolvency (Northern Ireland) Order 1989 or otherwise.

Chapter 3U.K.Attribution of gains of non-UK resident close companies

Gains of non-UK resident companies not otherwise chargeableU.K.

3Gains attributed to UK resident individuals etcU.K.

(1)This section applies if—

(a)a chargeable gain accrues at any time to a non-UK resident close company,

(b)the gain is connected to avoidance (see section 3A),

(c)the gain is not connected to a foreign trade or other economically significant foreign activities (see section 3A), and

(d)apart from this section, some or all of the gain would not be chargeable to corporation tax on the company.

(2)So much of the gain as would not otherwise be so chargeable is apportioned among participators, or indirect participators, in the company—

(a)who are resident in the United Kingdom at that time, or

(b)who are trustees of a settlement and are not resident in the United Kingdom at that time.

(3)The proportion of the amount of the gain to be apportioned to each person corresponds to the extent of the person's interest in the company as a participator or indirect participator.

(4)The amount apportioned to each person is treated as a chargeable gain accruing to the person.

(5)No apportionment of any part of a gain is made to an individual if—

(a)the gain accrues in a tax year which, as respects the individual, is a split year, and

(b)the gain accrues in the overseas part of the year.

(6)No apportionment of any part of a gain is made to a person if the total amount that would, apart from this subsection, be apportioned to—

(a)the person, and

(b)persons connected to the person,

is 25% or less of the amount of the gain falling to be apportioned.

(7)A person (“P”) is an “indirect participator” in a company (“A”) if—

(a)another company (“B”) which is a non-UK resident close company is a participator in A, and

(b)P is a participator in B or P is a participator in a third non-UK resident close company which is participator in B,

and so on through any number of non-UK resident close companies that are participators in other non-UK resident close companies.

(8)P's interest as an indirect participator in A in the case of any gain is determined by—

(a)apportioning the gain among the participators in A according to the extent of their respective interests as participators, and

(b)then further apportioning the gain apportioned to B among the participators in B according to the extent of their respective interests as participators, and so on through other companies.

(9)So far as it would go to reduce or extinguish chargeable gains accruing, as a result of this section, to a person in a chargeable period, this section applies to a loss accruing to the company on the disposal of an asset in that period as it would apply if there had been a gain.

(10)But—

(a)this only applies in relation to that person, and

(b)this section does not otherwise apply in relation to losses accruing to the company.

(11)In this section “a non-UK resident close company” means a company—

(a)which is not resident in the United Kingdom, and

(b)which would be a close company if it were resident in the United Kingdom.

3AGains connected to avoidance or foreign activities etcU.K.

(1)A gain accruing to a company on the disposal of an asset is taken to be “connected to avoidance” unless it is shown that neither—

(a)the disposal of the asset by the company, nor

(b)the acquisition or holding of the asset by the company,

formed part of a scheme or arrangements of which the main purpose, or one of the main purposes, was avoidance of liability to capital gains tax or corporation tax.

(2)A gain is “connected to a foreign trade” if it accrues on the disposal of an asset used only—

(a)for the purposes of a trade carried on by the company wholly outside the United Kingdom, or

(b)for the purposes of the foreign part of a trade carried on by the company partly within, and partly outside, the United Kingdom,

and the reference here to the foreign part of a trade is to the part of the trade carried on outside the United Kingdom.

(3)For this purpose an asset is to be regarded as used only for the purposes of a trade carried on by the company wholly outside the United Kingdom if—

(a)the asset is accommodation, or an interest or right in accommodation, situated outside the United Kingdom, and

(b)the accommodation has for each relevant period been furnished holiday accommodation of which a person has made a commercial letting.

(4)Each of the following is a “relevant period”—

(a)the period of 12 months ending with the date of the disposal and each of the two preceding periods of 12 months, or

(b)if the company has beneficially owned the accommodation (or interest or right) for more than 36 months, the period of 12 months ending with the date of the disposal and each of the preceding periods of 12 months throughout which the company had that beneficial ownership.

(5)The reference in this section to the commercial letting of furnished holiday accommodation is to be read in accordance with Chapter 6 of Part 4 of CTA 2009, but as if—

(a)sections 266, 268 and 268A were omitted, and

(b)the reference to an accounting period in section 267(1) were to a relevant period.

(6)A gain accruing on the disposal of an asset is “connected to other economically significant foreign activities” if—

(a)the asset is used only for the purposes of activities carried on by the company wholly or mainly outside the United Kingdom,

(b)the activities consist of the provision of goods or services on a commercial basis, and

(c)the activities also satisfy the staff, premises and economic value test.

(7)Activities satisfy the staff, premises and economic value test if they involve—

(a)the use of employees, agents or contractors of the company in numbers, and with competence and authority, commensurate with the size and nature of the activities,

(b)the use of premises and equipment commensurate with the size and nature of the activities, and

(c)the addition of economic value by the company to the persons to whom the goods or services are provided commensurate with the size and nature of the activities.

(8)This section applies for the purposes of section 3(1)(b) and (c).

3BParticipators and their interestsU.K.

(1)Participator” has the meaning given by section 454 of CTA 2010.

(2)Any reference to a person's interest as a participator in a company is to the interest in it represented by all the factors by reference to which the person is a participator.

(3)Any reference to the extent of a person's interest as a participator in a company is to such proportion of the interests as participators of all of the company's participators as, on a just and reasonable basis, is represented by that interest.

(4)If—

(a)the interest of a person in a company is wholly or partly represented by an interest under a settlement (“the beneficial interest”), and

(b)the beneficial interest is the factor (or one of them) by reference to which the person would, apart from this subsection, have an interest as a participator in the company,

that interest as a participator is, so far as represented by the beneficial interest, to be treated instead as the interest of the trustees of the settlement.

(5)If—

(a)exempt assets of a pension scheme are taken into account in ascertaining a person's interest as a participator in a company, and

(b)if those assets were ignored, an amount in respect of a gain accruing to the company would not be apportioned to the person as a result of section 3,

no amount in the respect of the gain is to be apportioned to the person as a result of that section.

(6)For this purpose—

(a)assets of a pension scheme” means assets held for the purposes of a fund or scheme to which section 271(1)(c) or (1A) applies, and

(b)those assets are “exempt” if, at the time when the gain accrues, a disposal of those assets would be exempt from tax as a result of either of those provisions.

(7)This section applies for the purposes of section 3.

Prevention of multiple chargesU.K.

3CPrevention of double UK taxationU.K.

(1)If—

(a)an amount of tax is paid by a person as a result of section 3 in respect of a gain, and

(b)there is a distribution of an amount in respect of the gain before the end of the relevant period,

the amount of tax is applied so as to reduce or extinguish any liability of the person to tax in respect of the distribution.

(2)For the purposes of subsection (1)—

(a)the distribution is one made by way of dividend or distribution of capital or on the dissolution of the company,

(b)the tax in respect of the distribution is income tax, corporation tax or capital gains tax, and

(c)in determining the liability to tax of any individual in respect of any distribution for a tax year it is to be assumed that the distribution is the highest part of the individual's income for the year.

(3)For the purposes of subsection (1) “the relevant period” means the period of 3 years from the end of whichever of the following periods is earlier—

(a)the period of account of the company in which the gain accrued, and

(b)the period of 12 months beginning with the date on which the gain accrued.

(4)The amount of tax paid by a person as a result of section 3 is allowable as a deduction in calculating a chargeable gain accruing on the disposal by the person of any asset representing the person's interest as a participator in the company.

(5)An amount of tax—

(a)is not to be used more than once under this section (whether to reduce or extinguish a liability or as a deduction or a combination of those things), and

(b)is not to be applied if it is reimbursed by the company.

Non-UK domiciled individuals and temporary non-residentsU.K.

3DNon-UK domiciled individualsU.K.

(1)This section applies if, as a result of section 3, an amount in respect of a gain accruing to a company in a tax year is apportioned to an individual who is not domiciled in the United Kingdom in that year.

(2)The apportioned amount is regarded for the purposes of paragraph 1 of Schedule 1 as accruing on a disposal of a foreign asset if the asset disposed of by the company is a foreign asset (but not otherwise).

(3)For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis)—

(a)treat any consideration obtained by the company on the disposal of the asset as deriving from the apportioned amount, and

(b)if that consideration is less than the market value of the asset, treat the asset as deriving from the apportioned amount.

(4)The apportioned amount may not be reduced or extinguished by a loss under section 3 if—

(a)the apportioned amount is regarded for the purposes of paragraph 1 of Schedule 1 as accruing on a disposal of a foreign asset,

(b)the remittance basis applies to the individual for the tax year in question, and

(c)any of the apportioned amount is remitted to the United Kingdom in a subsequent tax year.

(5)Paragraph 5 of Schedule 1 applies for the purposes of this section as it applies for the purposes of that Schedule.

3ETemporary non-residentsU.K.

(1)This section applies if—

(a)an individual is temporarily non-resident, and

(b)a gain or loss accrues to a company in a tax year falling wholly or partly in the temporary period of non-residence.

(2)So much of the gain as would, as a result of section 3, have been treated as accruing to the individual in the tax year if the residence assumption were made is to be treated as accruing to the individual in the period of return.

(3)But if—

(a)the remittance basis applies to the individual for the tax year that comprises or includes the period of return, and

(b)any part of the gain has not been remitted to the United Kingdom before the period of the return,

subsection (2) has effect subject to the further application of Schedule 1 (as read with section 3D) in relation to that part of the gain.

(4)Paragraph 5 of Schedule 1 applies for the purposes of subsection (3) as it applies for the purposes of that Schedule.

(5)So much of the loss accruing in the tax year as would, in accordance with section 3(9), have reduced or extinguished a gain treated as accruing to the individual in that year as a result of section 3 if the residence assumption were made is to be treated as accruing to the individual in the period of return.

(6)For the purposes of this section the “residence assumption” is—

(a)that the individual was resident in the United Kingdom for the tax year in which the gain or loss accrued to the company, and

(b)that the tax year was not a split year as respects the individual.

(7)Nothing in any double taxation arrangements prevents a charge to capital gains tax arising as a result of this section.

(8)For the purposes of this section each of the following expressions has the meaning given by Part 4 of Schedule 45 to the Finance Act 2013 (statutory residence test: anti-avoidance)—

Application to groupsU.K.

3FNon-resident groups of companiesU.K.

(1)This section applies, for the purposes of section 3, certain provisions of this Act (modified as mentioned below) in relation to non-resident companies which are members of a non-resident group of companies.

(2)The applied provisions are—

(a)section 41(8),

(b)section 171 but as if subsections (1)(b) and (1A) were omitted,

(c)section 173 but as if “to which this section applies” in subsections (1)(a) and (2)(a) were omitted, as if “such” in subsections (1)(c) and (2)(c) were omitted and as if subsection (3) were omitted,

(d)section 174(4) but as if “at a time when both were members of the group” were substituted for “ in a transfer to which section 171(1) applied ”,

(e)section 175(1) but as if “to which this section applies” were omitted, and

(f)section 179 but as if subsections (1)(b) and (1A) were omitted, as if for any reference to a group of companies there were substituted a reference to a non-resident group of companies and as if for any reference to a company there were substituted a reference to a non-resident company.

(3)In this section—

SupplementaryU.K.

3GSupplementary provisionsU.K.

(1)If tax payable by a person (“P”) as a result of section 3 is paid by—

(a)the company (“C”) to which the gain accrues, or

(b)a company by reference to which P is regarded as an indirect participator in C,

the amount paid is not a payment to P for tax purposes.

(2)The reference here to tax purposes is to the purposes of income tax, capital gains tax or corporation tax.

(3)For the purposes of section 3 the amount of a gain or loss accruing to a company is calculated as if the company were a company resident in the United Kingdom chargeable to corporation tax on the gain.]

F1Capital gains taxU.K.

F14Rates of capital gains taxU.K.

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F14ASection 4: special casesU.K.

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F14BDeduction of losses etc in most beneficial wayU.K.

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F14BARates, and use of unused basic rate band, in certain casesU.K.

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F14BBResidential property gain or lossU.K.

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F15 Accumulation and discretionary settlements.U.K.

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F16 Other special cases.U.K.

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F17 Time for payment of tax.U.K.

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Corporation taxU.K.

F18 Company’s total profits to include chargeable gains.U.K.

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F1Residence etc.U.K.

F19 Residence, including temporary residence.U.K.

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F110 Non-resident with United Kingdom branch or agency.U.K.

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F110ATemporary non-residents.U.K.

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F110AASection 10A: supplementaryU.K.

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F110BNon-resident company with United Kingdom permanent establishmentU.K.

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F111Visiting forces and official agentsU.K.

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F112Non-UK domiciled individuals to whom remittance basis appliesU.K.

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F113 Attribution of gains to members of non-resident companies.U.K.

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F113ASection 13(5): interpretationU.K.

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F114 Non-resident groups of companies.U.K.

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F114ASection 13: non-UK domiciled individualsU.K.

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F1CommentaryRef Ref="key-8f1b51e533ff9b07068f2c9150edcf5f"/>UK residential property: non-resident CGTU.K.

F114BMeaning of “non-resident CGT disposal”U.K.

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F114CMeaning of “disposal of a UK residential property interest”U.K.

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F114DPersons chargeable to capital gains tax on NRCGT gainsU.K.

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F114EFurther provision about use of NRCGT lossesU.K.

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F114FPersons not chargeable under section 14D if a claim is madeU.K.

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F114GSection 14F: divided companiesU.K.

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F114HSection 14F: arrangements for avoiding taxU.K.

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Part IIU.K. General Provisions relating to computation of gains and acquisitions and disposals of assets

Chapter IU.K. Introductory

15 Computation of gains.U.K.

(1)The amount of the gains accruing on the disposal of assets shall be computed in accordance with this Part, subject to the other provisions of this Act.

(2)Every gain shall, except as otherwise expressly provided, be a chargeable gain.

16 Computation of losses.U.K.

(1)Subject to [F4sections 261B, 261D and 263ZA] and except as otherwise expressly provided, the amount of a loss accruing on a disposal of an asset shall be computed in the same way as the amount of a gain accruing on a disposal is computed.

(2)Except as otherwise expressly provided, all the provisions of this Act which distinguish gains which are chargeable gains from those which are not, or which make part of a gain a chargeable gain, and part not, shall apply also to distinguish losses which are allowable losses from those which are not, and to make part of a loss an allowable loss, and part not; and references in this Act to an allowable loss shall be construed accordingly.

[F5(2A)A loss accruing to a person in a year of assessment shall not be an allowable loss for the purposes of this Act unless, in relation to that year, he gives a notice to an officer of the Board quantifying the amount of that loss; and sections 42 and 43 of the Management Act shall apply in relation to such a notice as if it were a claim for relief.]

F6(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F7(3A)If the person is an individual and the year is a split year as respects that individual, subsection (3) also applies to a loss accruing to the individual in the overseas part of that year.]

F8(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F4Words in s. 16(1) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 298 (with Sch. 2)

F5S. 16(2A) inserted (with effect in accordance with s. 103(7) of the amending Act) by Finance Act 1995 (c. 4), s. 113(1)

F6S. 16(3) omitted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 1 para. 24

F7S. 16(3A) inserted (with effect in accordance with Sch. 45 para. 153(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 45 para. 97

F8S. 16(4) omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 61

Modifications etc. (not altering text)

C73S. 16 excluded (with effect in accordance with art. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 42(2)

C74S. 16 excluded by The Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964), reg. 85Z4 (as inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by S.I. 2010/294, regs. 1(1), 21)

[F916ZALosses: non-UK domiciled individualsU.K.

[F10(1)An individual may make an election under this section in respect of—

(a)the first tax year in which section 809B of ITA 2007 (claim for remittance basis) applies to the individual, or

(b)the first tax year in which that section applies to the individual following a period in which the individual has been domiciled in the United Kingdom.

(2)Where an individual makes an election under this section in respect of a tax year, the election has effect in relation to the individual for—

(a)that tax year, and

(b)all subsequent tax years.

(2A)But if after making an election under this section an individual becomes domiciled in the United Kingdom at any time in a tax year, the election does not have effect in relation to the individual for—

(a)that tax year, or

(b)any subsequent tax year.

(2B)Where an election made by an individual under this section in respect of a tax year ceases to have effect by virtue of subsection (2A), the fact that it has ceased to have effect does not prevent the individual from making another election under this section in respect of a later tax year.

(3)If an individual does not make an election under this section in respect of a year referred to in subsection (1)(a) or (b), foreign losses accruing to the individual in—

(a)that tax year, or

(b)any subsequent tax year except one in which the individual is domiciled in the United Kingdom,

are not allowable losses.]

(4)Sections 42 and 43 of the Management Act (procedure and time limit for making claims), except section 42(1A) of that Act, apply in relation to an election under this section as they apply in relation to a claim for relief.

(5)An election under this section is irrevocable.

(6)In this section “foreign loss” means a loss accruing from the disposal of an asset situated outside the United Kingdom.

[F11(7)Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of this section.]]

Textual Amendments

F9Ss. 16ZA-16ZD inserted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 62

F10S. 16ZA(1)-(3) substituted (with effect in accordance with Sch. 8 para. 3(4) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 8 para. 3(2)

F11S. 16ZA(7) inserted (with effect in accordance with Sch. 8 para. 3(4) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 8 para. 3(3)

F1216ZBIndividual who has made election under section 16ZA: foreign chargeable gains remitted in tax year after tax year in which accrueU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12Ss. 16ZB-16ZD omitted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 1 para. 3

F1216ZCIndividual who has made election under section 16ZA and to whom remittance basis appliesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12Ss. 16ZB-16ZD omitted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 1 para. 3

F1216ZDSection 16ZC: supplementaryU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12Ss. 16ZB-16ZD omitted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 1 para. 3

[F1316ARestrictions on allowable lossesU.K.

(1)For the purposes of this Act, “allowable loss” does not include a loss accruing to a person if—

(a)it accrues to the person directly or indirectly in consequence of, or otherwise in connection with, any arrangements, and

(b)the main purpose, or one of the main purposes, of the arrangements is to secure a tax advantage.

(2)For the purposes of subsection (1)—

(3)For the purposes of subsection (1) it does not matter—

(a)whether the loss accrues at a time when there are no chargeable gains from which it could otherwise have been deducted, or

(b)whether the tax advantage is secured for the person to whom the loss accrues or for any other person.]

Textual Amendments

F13S. 16A inserted (with effect in accordance with s. 27(6) of the amending Act) by Finance Act 2007 (c. 11), s. 27(3)

17 Disposals and acquisitions treated as made at market value.U.K.

(1)Subject to the provisions of this Act, a person’s acquisition or disposal of an asset shall for the purposes of this Act be deemed to be for a consideration equal to the market value of the asset—

(a)where he acquires or, as the case may be, disposes of the asset otherwise than by way of a bargain made at arm’s length, and in particular where he acquires or disposes of it by way of gift or on a transfer into settlement by a settlor or by way of distribution from a company in respect of shares in the company, or

(b)where he acquires or, as the case may be, disposes of the asset wholly or partly for a consideration that cannot be valued, or in connection with his own or another’s loss of office or employment or diminution of emoluments, or otherwise in consideration for or recognition of his or another’s services or past services in any office or employment or of any other service rendered or to be rendered by him or another.

(2)Subsection (1) shall not apply to the acquisition of an asset if—

(a)there is no corresponding disposal of it, and

(b)there is no consideration in money or money’s worth or the consideration is of an amount or value lower than the market value of the asset.

Modifications etc. (not altering text)

C75S. 17 excluded (retrospective to 11.1.1994) by Finance Act 1994 (c. 9), s. 252(3), Sch. 24 para. 7(4)

C76S. 17 excluded (with saving) (retrospective to 11.1.1994) by Finance Act 1994 (c. 9), s. 252(3), Sch. 24 para. 11(2)

C77S. 17 excluded (15.1.2001) by Transport Act 2000 (c. 38), s. 275(1), Sch. 26 para. 24(1) (with Sch. 26 para. 24(2)); S.I. 2000/3376, art. 2

C78S. 17 excluded (15.1.2001) by Transport Act 2000 (c. 38), s. 275(1), Sch. 26 para. 31(1) (with Sch. 26 para. 31(2)); S.I. 2000/3376, art. 2

C79S. 17 restricted (E.W.S.) (24.7.2005) by Railways Act 2005 (c. 14), s. 60(2), Sch. 10 para. 25; S.I. 2005/1909, art. 2, Sch.

C80S. 17 excluded (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 39(1)

C81S. 17 excluded (8.9.2008 for specified purposes) by Housing and Regeneration Act 2008 (c. 17), s. 325(1), Sch. 7 para. 7(2); S.I. 2008/2358, arts. 2(1), 3(1)

C84S. 17(1) excluded (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 653(3), 1329(1) (with Sch. 2 Pts. 1, 2, Sch. 2 para. 94)

18 Transactions between connected persons.U.K.

(1)This section shall apply where a person acquires an asset and the person making the disposal is connected with him.

(2)Without prejudice to the generality of section 17(1) the person acquiring the asset and the person making the disposal shall be treated as parties to a transaction otherwise than by way of a bargain made at arm’s length.

(3)Subject to subsection (4) below, if on the disposal a loss accrues to the person making the disposal, it shall not be deductible except from a chargeable gain accruing to him on some other disposal of an asset to the person acquiring the asset mentioned in subsection (1) above, being a disposal made at a time when they are connected persons.

(4)Subsection (3) above shall not apply to a disposal by way of gift in settlement if the gift and the income from it is wholly or primarily applicable for educational, cultural or recreational purposes, and the persons benefiting from the application for those purposes are confined to members of an association of persons for whose benefit the gift was made, not being persons all or most of whom are connected persons.

(5)Where the asset mentioned in subsection (1) above is an option to enter into a sale or other transaction given by the person making the disposal a loss accruing to the person acquiring the asset shall not be an allowable loss unless it accrues on a disposal of the option at arm’s length to a person who is not connected with him.

(6)Subject to subsection (7) below, in a case where the asset mentioned in subsection (1) above is subject to any right or restriction enforceable by the person making the disposal, or by a person connected with him, then (where the amount of the consideration for the acquisition is, in accordance with subsection (2) above, deemed to be equal to the market value of the asset) that market value shall be—

(a)what its market value would be if not subject to the right or restriction, minus—

(b)the market value of the right or restriction or the amount by which its extinction would enhance the value of the asset to its owner, whichever is the less.

(7)If the right or restriction is of such a nature that its enforcement would or might effectively destroy or substantially impair the value of the asset without bringing any countervailing advantage either to the person making the disposal or a person connected with him or is an option or other right to acquire the asset or, in the case of incorporeal property, is a right to extinguish the asset in the hands of the person giving the consideration by forfeiture or merger or otherwise, the market value of the asset shall be determined, and the amount of the gain accruing on the disposal shall be computed, as if the right or restriction did not exist.

(8)Subsections (6) and (7) above shall not apply to a right of forfeiture or other right exercisable on breach of a covenant contained in a lease of land or other property, and shall not apply to any right or restriction under a mortgage or other charge.

[F14(9)If deductible clogged losses have accrued to a company, the company may make a claim in respect of an accounting period for—

(a)an amount of the deductible clogged losses to be treated, for the purposes of section 2A(1)(a), as allowable losses accruing in the accounting period, and

(b)the same amount of allowable losses accruing to the company in the period to be treated, for the purposes of section 2A(1)(b), as allowable losses previously accruing to the company while it was within the charge to corporation tax.

(10)The amount in respect of which the claim is made may not exceed the total amount of any allowable losses accruing to the company in the accounting period for which the claim is made.

(11)In subsection (9), “deductible clogged losses” means losses which would, apart from Part 7ZA of CTA 2010, be deductible under subsection (3) from chargeable gains accruing to the company in an accounting period.

(12)A claim under subsection (9) must be made by being included in the company’s tax return for the accounting period for which the claim is made.]

Textual Amendments

F14S. 18(9)-(12) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 17, 42 (with Sch. 4 paras. 43-46)

19 Deemed consideration in certain cases where assets disposed of in a series of transactions.U.K.

(1)For the purposes of this Act, in any case where—

(a)by way of 2 or more material transactions which are linked (a series of linked transactions), one person disposes of assets to another person with whom he is connected or to 2 or more other persons with each of whom he is connected, and

(b)the original market value of the assets disposed of by any of the transactions in the series, as determined under section 20, is less than the appropriate portion of the aggregate market value of the assets disposed of by all the transactions in the series, as so determined,

then, subject to subsection (2) below, the disposal effected by any linked transaction in the series in respect of which the condition in paragraph (b) above is fulfilled shall be deemed to be for a consideration equal to the appropriate portion referred to in that paragraph.

(2)Where the disposal effected by a material transaction is one to which section 58 applies, nothing in subsection (1) above shall affect the amount which, for the purposes of this Act, is the consideration for that disposal.

(3)Subject to subsection (5) below, any reference in this section to a material transaction is a reference to a transaction by way of gift or otherwise; and, for the purposes of this section, 2 or more material transactions are linked if they occur within the period of 6 years ending on the date of the last of them.

(4)This section shall apply or, as the case may be, shall again apply—

(a)when a second material transaction causes a series of linked transactions to come into being; and

(b)whenever, on the occurrence of a further material transaction, an existing series is extended by the inclusion of that transaction (whether or not an earlier transaction ceases to form part of the series);

and all such assessments and adjustments of assessments shall be made as may be necessary to give effect to this section on each such occasion.

(5)Where a member of a group of companies disposes of an asset to another member of the group in circumstances such that, by virtue of section 171, both companies are treated, so far as relates to corporation tax on chargeable gains, as if the consideration for the disposal were of such an amount as would secure that neither a gain nor a loss would accrue, the transaction by which that disposal is effected is not a material transaction; and a disposal in these circumstances is in this section referred to as an “inter-group transfer”.

(6)In any case where—

(a)a company (“company A”) disposes of an asset by way of a material transaction, and

(b)company A acquired the asset after 19th March 1985 by way of an inter-group transfer, and

(c)the disposal by company A is to a person who is connected with another company (“company B”) which at some time after 19th March 1985 disposed of the asset by way of an inter-group transfer, and

(d)either the disposal by way of inter-group transfer which is referred to in paragraph (c) above was the occasion of the acquisition referred to in paragraph (b) above or, between that disposal and that acquisition, there has been no disposal of the asset which was not an inter-group transfer,

then, for the purpose of determining whether subsection (1) above applies in relation to a series of linked transactions, the disposal by company A shall be treated as having been made by company B; but any increase in the consideration for that disposal resulting from the application of subsection (1) above shall have effect with respect to company A.

20 Original market value and aggregate market value for purposes of section 19.U.K.

(1)This section has effect for determining the original market value of assets and the aggregate market value of assets as mentioned in subsection (1)(b) of section 19.

(2)Expressions used in this section have the same meaning as in that section.

(3)Where there is a series of linked transactions, the original market value of the assets disposed of by each transaction in the series shall be determined as follows—

(a)if at the time in question the transaction is the most recent in the series, the original market value of the assets disposed of by that transaction is the market value which, apart from section 19, would be deemed to be the consideration for that transaction for the purposes of this Act; and

(b)in the case of any other transaction in the series, the original market value of the assets disposed of by that transaction is the value which, prior to the occurrence of the most recent transaction in the series, was or would have been deemed for the purposes of this Act to be the consideration for the transaction concerned (whether by virtue of the previous operation of section 19, or by virtue of any other provision of this Act).

(4)Subject to subsections (6) to (9) below, in relation to any transaction in a series of linked transactions—

(a)any reference in this section or section 19 to the aggregate market value of the assets disposed of by all the transactions in the series is a reference to what would have been the market value of all those assets for the purposes of this Act if, considering all the assets together, they had been disposed of by one disposal occurring at the time of the transaction concerned; and

(b)any reference in section 19 to the appropriate portion of the aggregate market value of the assets disposed of by all the transactions in the series is a reference to that portion of the market value determined in accordance with paragraph (a) above which it is reasonable to apportion to those of the assets which were actually disposed of by the transaction concerned.

(5)The reference in subsection (4)(a) above to considering all the assets together includes a reference not only to considering them as a group or holding or collection of assets retaining their separate identities but also (if it gives a higher market value) to considering them as brought together, physically or in law, so as to constitute either a single asset or a number of assets which are distinct from those which were comprised in each of the transactions concerned.

(6)If any of the assets disposed of by all the transactions in a series of linked transactions were acquired after the time of the first of those transactions, then, in the application of subsections (4) and (5) above in relation to each of the transactions in the series—

(a)no account shall be taken of any assets which were acquired after the time of that transaction unless they were acquired by way of an inter-group transfer; and

(b)subject to subsection (7) below, the number of assets of which account is to be taken shall be limited to the maximum number which were held by the person making the disposal at any time in the period beginning immediately before the first of the transactions in the series and ending immediately before the last.

(7)If, before the first of the transactions referred to in paragraph (b) of subsection (6) above, the person concerned (being a company) disposed of any assets by way of an inter-group transfer, the maximum number of assets referred to in that paragraph shall be determined as if the inter-group transfer had occurred after that first transaction.

(8)In the application of subsection (6) above in a case where the assets disposed of are securities, the assets disposed of by any of the transactions in a series of linked transactions shall be identified with assets acquired on an earlier date rather than with assets acquired on a later date.

(9)In subsection (8) above “securities” includes any assets which are of a nature to be dealt in without identifying the particular assets disposed of or acquired.

Chapter IIU.K. Assets and disposals of assets

General provisionsU.K.

21 Assets and disposals.U.K.

(1)All forms of property shall be assets for the purposes of this Act, whether situated in the United Kingdom or not, including—

(a)options, debts and incorporeal property generally, and

[F15(b)currency, with the exception (subject to express provision to the contrary) of sterling,]

(c)any form of property created by the person disposing of it, or otherwise coming to be owned without being acquired.

(2)For the purposes of this Act—

(a)references to a disposal of an asset include, except where the context otherwise requires, references to a part disposal of an asset, and

(b)there is a part disposal of an asset where an interest or right in or over the asset is created by the disposal, as well as where it subsists before the disposal, and generally, there is a part disposal of an asset where, on a person making a disposal, any description of property derived from the asset remains undisposed of.

Textual Amendments

F15S. 21(1)(b) substituted (19.7.2006) by Finance Act 2006 (c. 25), Sch. 12 para. 9

Modifications etc. (not altering text)

C85S. 21(2)(b) applied by 1970 c. 9, Sch. 3ZC para. 12(2) (as inserted (retrospective to 11.7.2019 and with effect in accordance with Sch. 7 para. 4(1)(a) of the amending Act) by Finance Act 2020 (c. 14), Sch. 7 para. 2)

C87S. 21(2) applied by 1970 c. 9, Sch. 3ZB para. 14(5) (as inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 49 paras. 6, 8)

22 Disposal where capital sums derived from assets.U.K.

(1)Subject to sections 23 and 26(1), and to any other exceptions in this Act, there is for the purposes of this Act a disposal of assets by their owner where any capital sum is derived from assets notwithstanding that no asset is acquired by the person paying the capital sum, and this subsection applies in particular to—

(a)capital sums received by way of compensation for any kind of damage or injury to assets or for the loss, destruction or dissipation of assets or for any depreciation or risk of depreciation of an asset,

(b)capital sums received under a policy of insurance of the risk of any kind of damage or injury to, or the loss or depreciation of, assets,

(c)capital sums received in return for forfeiture or surrender of rights, or for refraining from exercising rights, and

(d)capital sums received as consideration for use or exploitation of assets.

(2)In the case of a disposal within paragraph (a), (b), (c) or (d) of subsection (1) above, the time of the disposal shall be the time when the capital sum is received as described in that subsection.

(3)In this section “capital sum” means any money or money’s worth which is not excluded from the consideration taken into account in the computation of the gain.

[F16(4)Subsection (1) does not apply where a company receives, or becomes entitled to receive—

(a)a capital distribution within the meaning of section 122 (see instead subsection (1) of that section), or

(b)a distribution to which the charge to corporation tax on income under Part 9A of CTA 2009 (company distributions) applies or would apply were the distribution not exempt for the purposes of that Part.]

Textual Amendments

F16S. 22(4) inserted (with effect in accordance with Sch. 3 paras. 5, 7 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 3 para. 4(2) (with Sch. 3 para. 6(3))

Modifications etc. (not altering text)

C88S. 22 excluded (27.7.1993) by 1993 c. 37, s. 12, Sch. 2 Pt. I para.17

23 Receipt of compensation and insurance money not treated as a disposal.U.K.

(1)If the recipient so claims, receipt of a capital sum within paragraph (a), (b), (c) or (d) of section 22(1) derived from an asset which is not lost or destroyed shall not be treated for the purposes of this Act as a disposal of the asset if—

(a)the capital sum is wholly applied in restoring the asset, or

(b)(subject to subsection (2) below), the capital sum is applied in restoring the asset except for a part of the capital sum which is not reasonably required for the purpose and which is small as compared with the whole capital sum, or

(c)(subject to subsection (2) below), the amount of the capital sum is small, as compared with the value of the asset,

but, if the receipt is not treated as a disposal, all sums which would, if the receipt had been so treated, have been brought into account as consideration for that disposal in the computation of the gain shall be deducted from any expenditure allowable under Chapter III of this Part as a deduction in computing a gain on the subsequent disposal of the asset.

(2)If the allowable expenditure is less than the consideration for the disposal constituted by the receipt of the capital sum (or is nil)—

(a)paragraphs (b) and (c) of subsection (1) above shall not apply, and

(b)if the recipient so elects (and there is any allowable expenditure)—

(i)the amount of the consideration for the disposal shall be reduced by the amount of the allowable expenditure, and

(ii)none of that expenditure shall be allowable as a deduction in computing a gain accruing on the occasion of the disposal or any subsequent occasion.

In this subsection “allowable expenditure” means expenditure which, immediately before the disposal, was attributable to the asset under paragraphs (a) and (b) of section 38(1).

(3)If, in a case not falling within subsection (1)(b) above, a part of a capital sum within paragraph (a) or paragraph (b) of section 22(1) derived from an asset which is not lost or destroyed is applied in restoring the asset, then if the recipient so claims, that part of the capital sum shall not be treated as consideration for the disposal deemed to be effected on receipt of the capital sum but shall be deducted from any expenditure allowable under Chapter III of this Part as a deduction in computing a gain on the subsequent disposal of the asset.

(4)If an asset is lost or destroyed and a capital sum received by way of compensation for the loss or destruction, or under a policy of insurance of the risk of the loss or destruction, is within one year of receipt, or such longer period as the inspector may allow, applied in acquiring an asset in replacement of the asset lost or destroyed the owner shall if he so claims be treated for the purposes of this Act—

(a)as if the consideration for the disposal of the old asset were (if otherwise of a greater amount) of such amount as would secure that on the disposal neither a gain nor a loss accrues to him, and

(b)as if the amount of the consideration for the acquisition of the new asset were reduced by the excess of the amount of the capital sum received by way of compensation or under the policy of insurance, together with any residual or scrap value, over the amount of the consideration which he is treated as receiving under paragraph (a) above.

(5)A claim shall not be made under subsection (4) above if part only of the capital sum is applied in acquiring the new asset but if all of that capital sum except for a part which is less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal of the old asset is so applied, then the owner shall if he so claims be treated for the purposes of this Act—

(a)as if the amount of the gain so accruing were reduced to the amount of the said part (and, if not all chargeable gain, with a proportionate reduction in the amount of the chargeable gain), and

(b)as if the amount of the consideration for the acquisition of the new asset were reduced by the amount by which the gain is reduced under paragraph (a) of this subsection.

[F17(6)If a building (“the old building”) is destroyed or irreparably damaged, and all or part of a capital sum received by way of compensation for the destruction or damage, or under a policy of insurance of the risk of the destruction or damage, is applied by the recipient in constructing or otherwise acquiring a replacement building situated on other land (“the new building”), then for the purposes of subsections (4) and (5) above each of the old building and the new building shall be regarded as an asset separate from the land on which it is or was situated and the old building shall be treated as lost or destroyed.

(7)For the purposes of subsection (6) above:

(a)references to a building include references to any permanent or semi-permanent structure in the nature of a building; and

(b)the reference to a sum applied in acquiring the new building does not include a reference to a sum applied in acquiring the land on which the new building is situated; and

(c)all necessary apportionments shall be made of any expenditure, compensation or consideration, and the method of apportionment shall be such as is just and reasonable.

(8)This section shall apply in relation to a wasting asset with the following modifications:

(a)paragraphs (b) and (c) of subsection (1) above, and subsection (2) above, shall not apply; and

(b)in subsections (1) and (3) above, the amount of the expenditure from which the deduction is to be made shall be the amount which would have been allowable under Chapter III of this Part if the asset had been disposed of immediately after the application of the capital sum.]

Textual Amendments

F17S. 23(6)(7)(8) substituted for s. 23(6) (with effect in accordance with Sch. 39 para. 3(3) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 3(2)

Modifications etc. (not altering text)

C89S. 23(4) modified (retrospective to 11.1.1994) by Finance Act 1994 (c. 9), s. 252(3), Sch. 24 para. 3(1)(3)

C90S. 23(4) modified (19.9.1994) by Coal industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 3(1)-(3) (with Sch. 4 para. 14); S.I. 1994/2189, art. 2, Sch.

C91S. 23(4)(5) modified (24.7.1996) by Broadcasting Act 1996 (c. 55), s. 149(1), Sch. 7 para. 10(1)(3) (with Sch. 7 para. 9(1))

C92S. 23(5) modified (retrospective to 11.1.1994) by Finance Act 1994 (c. 9), s. 252(3), Sch. 24 para. 3(2)(3)

C93S. 23(5) modified (19.9.1994) by Coal industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 3(1)-(3) (with Sch. 4 para. 14); S.I. 1994/2189, art. 2, Sch.

24 Disposals where assets lost or destroyed, or become of negligible value.U.K.

(1)Subject to the provisions of this Act and, in particular to [F18sections 140A(1D), 140E(7) and 144], the occasion of the entire loss, destruction, dissipation or extinction of an asset shall, for the purposes of this Act, constitute a disposal of the asset whether or not any capital sum by way of compensation or otherwise is received in respect of the destruction, dissipation or extinction of the asset.

[F19(1A)A negligible value claim may be made by the owner of an asset (“P”) if condition A or B is met.

(1B)Condition A is that the asset has become of negligible value while owned by P.

(1C)Condition B is that—

(a)the disposal by which P acquired the asset was a no gain/no loss disposal,

(b)at the time of that disposal the asset was of negligible value, and

(c)between the time when the asset became of negligible value and the disposal by which P acquired it, each other disposal (if any) of the asset was a no gain/no loss disposal.]

[F20(2)[F21Where a negligible value claim is made:]

(a)this Act shall apply as if the claimant had sold, and immediately reacquired, the asset at the time of the claim or (subject to paragraphs (b) and (c) below) at any earlier time specified in the claim, for a consideration of an amount equal to the value specified in the claim.

(b)An earlier time may be specified in the claim if:

(i)the claimant owned the asset at the earlier time; and

(ii)the asset had become of negligible value at the earlier time; and either

(iii)for capital gains tax purposes the earlier time is not more than two years before the beginning of the year of assessment in which the claim is made; or

(iv)for corporation tax purposes the earlier time is on or after the first day of the earliest accounting period ending not more than two years before the time of the claim.

(c)Section 93 of and Schedule 12 to the Finance Act 1994 (indexation losses and transitional relief) shall have effect in relation to an asset to which this section applies as if the sale and reacquisition occurred at the time of the claim and not at any earlier time.]

(3)For the purposes of [F22this section], a building and any permanent or semi-permanent structure in the nature of a building may be regarded as an asset separate from the land on which it is situated, but [F23where a building or structure is so regarded,] the person deemed to make the disposal of the building or structure shall be treated as if he had also sold, and immediately reacquired, the site of the building or structure (including in the site any land occupied for purposes ancillary to the use of the building or structure) for a consideration equal to its market value at that time.

[F24(3A)Subsection (3C) applies, for the purposes of this section, in relation to an asset which is a leasehold interest in a building or structure by reference to which a person is entitled to an allowance under Part 2A of CAA 2001 (structures and buildings allowances).

(3B)For the purposes of subsection (3A), “leasehold interest” is to be construed in accordance with section 270IH of CAA 2001.

(3C)Where this subsection applies—

(a)the building or structure is to be regarded, for the purposes of this section, as an asset separate from the land on which it is situated, and

(b)subsection (3) does not apply.

(3D)But subsection (3C) does not apply if the person deemed to make the disposal of the building or structure makes an election under this subsection.

(3E)An election under subsection (3D), in respect of a deemed disposal, must be made by a notice given to an officer of Revenue and Customs—

(a)in the case of an election by a person within the charge to corporation tax, within the period of two years from the end of the accounting period in which the disposal is deemed to be made; and

(b)in any other case, on or before the first anniversary of the 31 January following the year of assessment in which the disposal is deemed to be made.

(3F)An election under subsection (3D) is irrevocable. ]

[F25(4)For the purposes of subsection (1C), a no gain/no loss disposal is one which, by virtue of any of the no gain/no loss provisions, neither a gain nor a loss accrues to the person making the disposal.]

Textual Amendments

F18Words in s. 24(1) substituted (with effect in accordance with reg. 3(2) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 2 para. 3 (with S.I. 2008/1579, reg. 4(1))

F19S. 24(1A)-(1C) inserted (with effect in accordance with art. 4(6) of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2009 (S.I. 2009/730), arts. 1(1), 4(2)

F20S. 24(2) substituted (with effect in accordance with Sch. 39 para. 4(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 4(1)

F21Words in s. 24(2) substituted (with effect in accordance with art. 4(6) of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2009 (S.I. 2009/730), arts. 1(1), 4(3)

F22Words in s. 24(3) substituted (with effect in accordance with art. 4(6) of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2009 (S.I. 2009/730), arts. 1(1), 4(4)(a)

F23Words in s. 24(3) substituted (with effect in accordance with art. 4(6) of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2009 (S.I. 2009/730), arts. 1(1), 4(4)(b)

F25S. 24(4) inserted (with effect in accordance with art. 4(6) of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2009 (S.I. 2009/730), arts. 1(1), 4(5)

Modifications etc. (not altering text)

C94S. 24 excluded by Finance Act 1996 (c. 8), Sch. 9 para. 12B(5) (as substituted (with effect in accordance with reg. 3(2) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 2 para. 8 (with S.I. 2008/1579, reg. 4(1)))

C95S. 24 excluded by Finance Act 1996 (c. 8), Sch. 9 para. 12D(5) (as inserted (with effect in accordance with reg. 3(1) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 1 para. 16 (with S.I. 2008/1579, reg. 4(1)))

C96S. 24 excluded by Finance Act 2002 (c. 23), Sch. 26 para. 30D(5) (as inserted (with effect in accordance with reg. 3(1) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 1 para. 19 (with S.I. 2008/1579, reg. 4(1)))

C97S. 24 excluded by Finance Act 2002 (c. 23), Sch. 26 para. 85(1D) (as inserted (with effect in accordance with reg. 3(1) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 1 para. 21(2) (with S.I. 2008/1579, reg. 4(1)))

C98S. 24 excluded by Finance Act 2002 (c. 23), Sch. 26 para. 30B(5) (as substituted (with effect in accordance with reg. 3(2) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 2 para. 10 (with S.I. 2008/1579, reg. 4(1)))

C99S. 24 excluded by Finance Act 2002 (c. 23), Sch. 29 para. 85A(6) (as substituted (with effect in accordance with reg. 3(2) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 2 para. 11 (with S.I. 2008/1579, reg. 4(1)))

[F2624AStructures and buildings contributions allowances: destruction of assetU.K.

(1)This section applies if—

(a)there is a deemed disposal of an asset by a person (“P”) under section 24(1),

(b)the asset is an interest in a building or structure which is “an interest in UK land” (as defined in section 1C) or an equivalent interest in land outside the United Kingdom,

(c)a contribution allowance under Part 2A of CAA 2001 (see section 538A of that Act) has been made to another person (“C”) by reference to C’s contribution to expenditure in relation to the building or structure, and

(d)C does not have an interest in the building or structure which is “an interest in UK land” for the purposes of section 1C.

(2)C may make a claim for this Act to have effect as if an allowable loss equal to the unclaimed allowance amount had accrued to C on the deemed disposal of the asset by P.

(3)For the purposes of this section, the “unclaimed allowance amount” in relation to a contribution allowance under Part 2A of CAA 2001, is the amount of the difference between—

(a)the qualifying contribution amount, and

(b)the amount of the contribution allowance to which an entitlement arose (or would have arisen if the conditions in section 270AA(2) of that Act had been met at all times since an entitlement to the contribution allowance first arose) before the deemed disposal under section 24(1).

(4)For the purposes of subsection (3), the “qualifying contribution amount” is the amount of C’s contribution to expenditure in respect of which the contribution allowance is available (see sections 270AA and 538A of that Act), if and to the extent that the expenditure is not allowable under section 38 as a deduction in computing the gain accruing to P on the deemed disposal.

(5)A claim under this section must—

(a)include information identifying the building or structure by reference to which the contribution allowance was made, and

(b)specify the unclaimed allowance amount.]

25 Non-residents: deemed disposals.U.K.

(1)Where an asset ceases by virtue of becoming situated outside the United Kingdom to be a chargeable asset in relation to a person, he shall be deemed for all purposes of this Act—

(a)to have disposed of the asset immediately before the time when it became situated outside the United Kingdom, and

(b)immediately to have reacquired it,

at its market value at that time.

(2)Subsection (1) above does not apply—

(a)where the asset becomes situated outside the United Kingdom contemporaneously with the person there mentioned ceasing to carry on a trade in the United Kingdom through a branch or agency, or

(b)where the asset is an exploration or exploitation asset.

(3)Where an asset ceases to be a chargeable asset in relation to a person by virtue of his ceasing to carry on a trade in the United Kingdom through a branch or agency, he shall be deemed for all purposes of this Act—

(a)to have disposed of the asset immediately before the time when he ceased to carry on the trade in the United Kingdom through a branch or agency, and

(b)immediately to have reacquired it,

at its market value at that time.

[F27(3A)Subsection (3) above shall not apply if—

(a)the person ceasing to carry on the trade is a company, and

[F28(b)on ceasing to carry on the trade the asset is disposed of in circumstances in which section 139 or 171 applies.]]

F29(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)Subsection (3) above does not apply to an asset which is a chargeable asset in relation to the person there mentioned at any time after he ceases to carry on the trade in the United Kingdom through a branch or agency and before the end of the chargeable period in which he does so.

(6)In this section—

(7)For the purposes of this section an asset is at any time a chargeable asset in relation to a person if, were it to be disposed of at that time, any chargeable gains accruing to him on [F30the disposal would be chargeable to capital gains tax under section 1A(3)(a) or to corporation tax under section 2B(3).]

(8)This section shall apply as if references to a trade included references to a profession or vocation.

Textual Amendments

F27S. 25(3A) inserted (with effect in accordance with Sch. 29 para. 6(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 29 para. 6(2) (with Sch. 29 para. 46(5))

F28S. 25(3A)(b) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 25(2)

F29S. 25(4) repealed (with effect in accordance with Sch. 29 para. 6(5), Sch. 40 Pt. 2(12) Note 3 of the amending Act) by Finance Act 2000 (c. 17), Sch. 29 para. 6(3), Sch. 40 Pt. II(12) (with Sch. 29 para. 46(5))

F30Words in s. 25(7) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 25(3)

Modifications etc. (not altering text)

C100S. 25(2)(3)(5) modified (with effect in accordance with s. 153(4) of the amending Act) by Finance Act 2003 (c. 14), s. 153(2)(b)

[F3125ZAPostponing gain or loss under section 25(3): interests in UK landU.K.

(1)This section applies if an interest in UK land is deemed to have been disposed of under section 25(3) by a person at any time.

(2)The gain or loss that, but for this subsection, would have accrued to the person at that time is not to accrue at that time.

(3)But, on a subsequent disposal by the person of the whole or part of the interest in UK land, the whole or a corresponding part of the gain or loss is treated as accruing on the subsequent disposal.

(4)This gain or loss is in addition to any gain or loss that actually accrues on the subsequent disposal.

(5)A disposal to which section 171 (transfers within a group) applies does not count as a subsequent disposal for the purposes of this section.

(6)A person may elect for a disposal deemed to have been made under section 25(3) to be excluded from the operation of this section.

(7)An election made by a company must be made within 2 years after the day on which the deemed disposal occurs.

(8)In this section “interest in UK land” has the meaning given by section 1C.]

Textual Amendments

F31S. 25ZA substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 26

[F3225ALong funding leases of plant or machinery: deemed disposalsU.K.

(1)This section applies where plant or machinery is used for the purpose of leasing under a long funding lease.

(2)The lessor shall be deemed for all purposes of this Act—

(a)to have disposed of the plant or machinery at the commencement of the term of the lease at [F33the relevant disposal value], and

(b)to have immediately reacquired it at the same value.

(3)The lessor shall also be deemed for all purposes of this Act—

(a)to have disposed of the plant or machinery on the termination of the lease for a consideration equal to the termination amount, and

(b)to have immediately reacquired it for the same consideration.

[F34(4)Relevant disposal value” means—

(a)in relation to a long funding finance lease, the disposal value described in item 5A of the table in section 61(2) of the Capital Allowances Act (disposal values), and

(b)in relation to a long funding operating lease, the disposal value described in item 5B of that table.]

(5)For the purposes of this section, the following expressions have the meaning given in Chapter 6A of Part 2 of the Capital Allowances Act (interpretation of provisions about long funding leases)—

Textual Amendments

F32S. 25A inserted (with effect in accordance with Sch. 9 para. 4(2) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 4(1)

F33Words in s. 25A(2)(a) substituted (with effect in accordance with Sch. 32 para. 5(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 3(2)

F34S. 25A(4) substituted for s. 25A(4)-(4D) (with effect in accordance with Sch. 32 para. 5(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 3(3)

F35Words in s. 25A(5) omitted (with effect in accordance with Sch. 32 para. 5(2) of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 32 para. 3(4)

26 Mortgages and charges not to be treated as disposals.U.K.

(1)The conveyance or transfer by way of security of an asset or of an interest or right in or over it, or transfer of a subsisting interest or right by way of security in or over an asset (including a retransfer on redemption of the security), shall not be treated for the purposes of this Act as involving any acquisition or disposal of the asset.

(2)Where a person entitled to an asset by way of security or to the benefit of a charge or incumbrance on an asset deals with the asset for the purpose of enforcing or giving effect to the security, charge or incumbrance, his dealings with it shall be treated for the purposes of this Act as if they were done through him as nominee by the person entitled to it subject to the security, charge or incumbrance; and this subsection shall apply to the dealings of any person appointed to enforce or give effect to the security, charge or incumbrance as receiver and manager or judicial factor as it applies to the dealings of the person entitled as aforesaid.

(3)An asset shall be treated as having been acquired free of any interest or right by way of security subsisting at the time of any acquisition of it, and as being disposed of free of any such interest or right subsisting at the time of the disposal; and where an asset is acquired subject to any such interest or right the full amount of the liability thereby assumed by the person acquiring the asset shall form part of the consideration for the acquisition and disposal in addition to any other consideration.

[F3626ATransfer of dormant bank or building society accountU.K.

(1)This section applies where the balance of a dormant account held by a person with a bank or building society is transferred—

(a)to an authorised reclaim fund, with the result that section 1 of the Dormant Bank and Building Society Accounts Act 2008 applies in relation to the account, or

(b)to an authorised reclaim fund and one or more charities, with the result that section 2 of that Act applies in relation to the account.

(2)For the purposes of this Act—

(a)the transfer is not to be treated as involving any acquisition or disposal of an asset, and

(b)the person's rights under Part 1 of that Act are to be treated as the same asset as the original rights, acquired as the original rights were acquired and having the same characteristics as those rights.

(3)“The original rights” are the person's rights against the bank or building society immediately before the transfer.

(4)Terms used in this section and in the Dormant Bank and Building Society Accounts Act 2008 have the same meaning in this section as in that Act.]

Textual Amendments

27 Disposals in cases of hire-purchase and similar transactions.U.K.

A hire-purchase or other transaction under which the use and enjoyment of an asset is obtained by a person for a period at the end of which the property in the asset will or may pass to that person shall be treated for the purposes of this Act, both in relation to that person and in relation to the person from whom he obtains the use and enjoyment of the asset, as if it amounted to an entire disposal of the asset to that person at the beginning of the period for which he obtains the use and enjoyment of the asset, but subject to such adjustments of tax, whether by way of repayment or discharge of tax or otherwise, as may be required where the period for which that person has the use and enjoyment of the asset terminates without the property in the asset passing to him.

28 Time of disposal and acquisition where asset disposed of under contract.U.K.

(1)Subject to section 22(2), and subsection (2) below, where an asset is disposed of and acquired under a contract the time at which the disposal and acquisition is made is the time the contract is made (and not, if different, the time at which the asset is conveyed or transferred).

(2)If the contract is conditional (and in particular if it is conditional on the exercise of an option) the time at which the disposal and acquisition is made is the time when the condition is satisfied.

Modifications etc. (not altering text)

C101S. 28 extended (19.9.1994) by Coal industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 2(2) (with Sch. 4 para. 14); S.I. 1994/2189, art. 2, Sch.

C102S. 28 applied (19.9.1994) by Coal industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 24(9) (with Sch. 4 para. 14); S.I. 1994/2189, art. 2, Sch.

C103S. 28(1) excluded (with application in accordance with Sch. 3 para. 3(1) of the amending Act) by Finance Act 2020 (c. 14), Sch. 3 para. 3(2)

Value shiftingU.K.

29 General provisions.U.K.

(1)Without prejudice to the generality of the provisions of this Act as to the transactions which are disposals of assets, any transaction which under the following subsections is to be treated as a disposal of an asset—

(a)shall be so treated (with a corresponding acquisition of an interest in the asset) notwithstanding that there is no consideration, and

(b)so far as, on the assumption that the parties to the transaction were at arm’s length, the party making the disposal could have obtained consideration, or additional consideration, for the disposal, shall be treated as not being at arm’s length and the consideration so obtainable, or the additional consideration so obtainable added to the consideration actually passing, shall be treated as the market value of what is acquired.

(2)If a person having control of a company exercises his control so that value passes out of shares in the company owned by him or a person with whom he is connected, or out of rights over the company exercisable by him or by a person with whom he is connected, and passes into other shares in or rights over the company, that shall be a disposal of the shares or rights out of which the value passes by the person by whom they were owned or exercisable.

(3)A loss on the disposal of an asset shall not be an allowable loss to the extent to which it is attributable to value having passed out of other assets, being shares in or rights over a company which by virtue of the passing of value are treated as disposed of under subsection (2) above.

(4)If, after a transaction which results in the owner of land or of any other description of property becoming the lessee of the property there is any adjustment of the rights and liabilities under the lease, whether or not involving the grant of a new lease, which is as a whole favourable to the lessor, that shall be a disposal by the lessee of an interest in the property.

(5)If an asset is subject to any description of right or restriction the extinction or abrogation, in whole or in part, of the right or restriction by the person entitled to enforce it shall be a disposal by him of the right or restriction.

30 Tax-free benefits.U.K.

(1)This section has effect as respects the disposal of an asset if a scheme has been effected or arrangements have been made (whether before or after the disposal) whereby—

(a)the value of the asset F37... has been materially reduced, and

(b)a tax-free benefit has been or will be conferred—

(i)on the person making the disposal or a person with whom he is connected, or

(ii)subject to subsection (4) below, on any other person.

[F38(2)But, for the purposes of corporation tax, this section does not have effect if the disposal of the asset is a disposal by a company of shares in, or securities of, another company (as to which see section 31).]

(3)For the purposes of subsection (1)(b) above a benefit is conferred on a person if he becomes entitled to any money or money’s worth or the value of any asset in which he has an interest is increased or he is wholly or partly relieved from any liability to which he is subject; and a benefit is tax-free unless it is required, on the occasion on which it is conferred on the person in question, to be brought into account in computing his income, profits or gains for the purposes of income tax, capital gains tax or corporation tax.

(4)This section shall not apply by virtue of subsection (1)(b)(ii) above [F39in a case where] avoidance of tax was not the main purpose or one of the main purposes of the scheme or arrangements in question.

(5)Where this section has effect in relation to any disposal, any allowable loss or chargeable gain accruing on the disposal shall be calculated as if the consideration for the disposal were increased by such amount as [F40is] just and reasonable having regard to the scheme or arrangements and the tax-free benefit in question.

(6)Where—

(a)by virtue of subsection (5) above the consideration for the disposal of an asset has been treated as increased, and

(b)the benefit taken into account under subsection (1)(b) above was an increase in the value of another asset,

any allowable loss or chargeable gain accruing on the first disposal of the other asset after the increase in its value shall be calculated as if the consideration for that disposal were reduced by such amount as [F41is] just and reasonable having regard to the scheme or arrangements in question and the increase made in relation to the disposal mentioned in paragraph (a) above.

(7)References in this section to a disposal do not include references to any disposal falling within section 58(1), 62(4) or 171(1).

F42(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)In relation to a case in which the disposal of an asset precedes its acquisition the references in subsections (1)(a) and (2) above to a reduction shall be read as including a reference to an increase.

Textual Amendments

F37Words in s. 30(1)(a) omitted (with effect in accordance with Sch. 9 para. 6 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 9 para. 1(a)

F38S. 30(2) substituted (with effect in accordance with Sch. 9 para. 6 of the amending Act) by Finance Act 2011 (c. 11), Sch. 9 para. 1(b)

F39Words in s. 30(4) substituted (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 46

F40Word in s. 30(5) substituted (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 47(a)

F41Word in s. 30(6) substituted (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 47(a)

F42S. 30(8) omitted (with effect in accordance with Sch. 9 para. 6 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 9 para. 1(c)

Modifications etc. (not altering text)

C104S. 30 excluded (retrospective to 5.11.2993) by Finance Act 1994 (c. 9), s. 252(2), Sch. 24 para. 4(1)

C105S. 30 excluded (19.9.1994) by Coal industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 4 (with Sch. 4 para. 14); S.I. 1994/2189, art. 2, Sch.

C106S. 30 modified (24.7.1996) by Broadcasting Act 1996 (c. 55), s. 149(1), Sch. 7 para. 9(1)

C107S. 30 applied (with modifications) (with effect in accordance with s. 63(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 15 para. 71(3)

C108S. 30 excluded (6.11.2000) by Postal Services Act 2000 (c. 26), s. 130(1), Sch. 4 para. 6; S.I. 2000/2957, art. 2(1), Sch. 1

C109S. 30 excluded (1.2.2001) by Transport Act 2000 (c. 38), s. 275(1), Sch. 7 para. 5; S.I. 2001/57, art. 3(1)

C110S. 30 excluded (15.1.2001) by Transport Act 2000 (c. 38), s. 275(1), Sch. 26 para. 36; S.I. 2000/3376, art. 2

C111S. 30 modified (E.W.S.) (8.6.2005 for specified purposes, 24.7.2005 in so far as not already in force) by Railways Act 2005 (c. 14), s. 60(2), Sch. 10 para. 31; S.I. 2005/1444, art. 2(1), Sch. 1; S.I. 2005/1909, art. 2, Sch.

C112S. 30(5) excluded (retrospective to 11.1.1994) by Finance Act 1994 (c. 9), s. 252(3), Sch. 24 para. 4(2)(3)

C113S. 30(5) excluded (24.7.1996) by Broadcasting Act 1996 (c. 55), s. 149(1), Sch. 7 para. 9(3)

[F4331Disposal of shares or securities by a companyU.K.

(1)For the purposes of corporation tax, subsection (2) has effect as respects the disposal by a company (“the disposing company”) of shares in, or securities of, another company if—

(a)arrangements have been made whereby the value of those shares or securities, or any relevant asset, is materially reduced,

(b)the main purpose, or one of the main purposes, of the arrangements is to obtain a tax advantage, and

(c)the arrangements do not consist solely of the making of an exempt distribution.

(2)Any allowable loss or chargeable gain accruing on the disposal is to be calculated as if the consideration for the disposal were increased by such amount as is just and reasonable having regard to—

(a)the arrangements, and

(b)any charge to, or relief from, corporation tax that, in the absence of this section, would arise in consequence of the disposal or the arrangements.

(3)For the purposes of subsection (1)—

(a)an asset is a relevant asset if, at the time of the disposal, it is owned by a company which is a member of the same group as the disposing company, and

(b)it does not matter whether the tax advantage is obtained for the disposing company or any other person.

(4)In relation to a case in which the disposal of the shares or securities precedes their acquisition, the reference in subsection (1)(a) to a reduction is to be read as including a reference to an increase.

(5)Where, but for arrangements to which subsection (6) applies, a transaction would, by virtue of section 29(2), be treated as a disposal of shares by a company, that transaction is to be treated as if it were, by virtue of section 29(2), a disposal of those shares.

(6)The arrangements to which this subsection applies are arrangements—

(a)whereby the value of the shares or securities is materially reduced, and

(b)the main purpose, or one of the main purposes, of which is to obtain a tax advantage (whether for the company or any other person).

(7)In this section—

Textual Amendments

F43S. 31 substituted for ss. 31-34 (with effect in accordance with Sch. 9 para. 6 of the amending Act) by Finance Act 2011 (c. 11), Sch. 9 para. 2

F4331A Asset-holding company leaving the group.U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F43S. 31 substituted for ss. 31-34 (with effect in accordance with Sch. 9 para. 6 of the amending Act) by Finance Act 2011 (c. 11), Sch. 9 para. 2

F4332 Disposals within a group followed by a disposal of shares.U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F43S. 31 substituted for ss. 31-34 (with effect in accordance with Sch. 9 para. 6 of the amending Act) by Finance Act 2011 (c. 11), Sch. 9 para. 2

F4333 Provisions supplementary to sections 30 to 32.U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F43S. 31 substituted for ss. 31-34 (with effect in accordance with Sch. 9 para. 6 of the amending Act) by Finance Act 2011 (c. 11), Sch. 9 para. 2

F4333A Modification of sections 30 to 33 in relation to chargeable intangible assetU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F43S. 31 substituted for ss. 31-34 (with effect in accordance with Sch. 9 para. 6 of the amending Act) by Finance Act 2011 (c. 11), Sch. 9 para. 2

F4334 Transactions treated as a reorganisation of share capital.U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F43S. 31 substituted for ss. 31-34 (with effect in accordance with Sch. 9 para. 6 of the amending Act) by Finance Act 2011 (c. 11), Sch. 9 para. 2

Chapter IIIU.K. Computation of gains: General provisions

Re-basing to 1982, and assets held on 6th April 1965U.K.

35 Assets held on 31st March 1982 (including assets held on 6th April 1965).U.K.

(1)This section applies to a disposal of an asset which was held on 31st March 1982 by the person making the disposal.

(2)[F44In] computing for the purpose of this Act the gain or loss accruing on the disposal it shall be assumed that the asset was on 31st March 1982 sold by the person making the disposal, and immediately reacquired by [F45that person], at its market value on that date.

[F46(2A)For the purposes of corporation tax, subsection (2) above has effect subject to subsections (3) to (8) below (and see also subsections (9) and (10)).]

(3)Subject to subsection (5) below, subsection (2) above shall not apply to a disposal—

(a)where a gain would accrue on the disposal to the person making the disposal if that subsection did apply, and either a smaller gain or a loss would so accrue if it did not,

(b)where a loss would so accrue if that subsection did apply, and either a smaller loss or a gain would accrue if it did not,

(c)where, either on the facts of the case or by virtue of Schedule 2, neither a gain nor a loss would accrue if that subsection did not apply, F47...

[F48(ca)where, by virtue of section 195B, 195C or 195E, neither a gain nor a loss accrues to the person making the disposal, or]

(d)where neither a gain nor a loss would accrue by virtue of any of [F49the no gain/no loss provisions.]

[F50(4)Where in the case of a disposal of an asset—

(a)the effect of subsection (2) above would be to substitute a loss for a gain or a gain for a loss, but

(b)the application of subsection (2) is excluded by subsection (3),

it shall be assumed in relation to the disposal that the asset was acquired by the person making the disposal for a consideration such that, on the disposal, neither a gain nor a loss accrues to [F51that person].

(5)If a person so elects, disposals made by [F52that person] (including any made by [F52that person] before the election) shall fall outside subsection (3) above (so that subsection (2) above is not excluded by that subsection).

(6)An election by a person under subsection (5) above shall be irrevocable and shall be made by notice to [F53an officer of the Board] at any time before 6th April 1990 or at any time during the period beginning with the day of the first relevant disposal and ending—

[F54(a)F55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(aa)F56... 2 years after the end of the accounting period in which the disposal is made; or

(b)F57... at such later time as the Board may allow;]

and “the first relevant disposal” means the first disposal to which this section applies which is made by the person making the election.

(7)An election made by a person under subsection (5) above in one capacity does not cover disposals made by [F58that person] in another capacity.

(8)All such adjustments shall 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 under subsection (5) above.

(9)Schedule 2 shall have effect [F59for the purposes of corporation tax] in relation to disposals of assets owned on 6th April 1965 in cases where neither subsection (2) nor subsection (4) above applies.

(10)Schedule 3, which contains provisions supplementary to subsections (1) to (8) above, shall have effect [F60for the purposes of capital gains tax and corporation tax].]

Textual Amendments

F44Word in s. 35(2) substituted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 58(2)(a)

F45Words in s. 35(2) substituted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 58(2)(b)

F46S. 35(2A) inserted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 58(3)

F47Word in s. 35(3)(c) omitted (with effect in accordance with Sch. 40 para. 8 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 40 para. 2(a)

F48S. 35(3)(ca) inserted (with effect in accordance with Sch. 40 para. 8 of the amending Act) by Finance Act 2009 (c. 10), Sch. 40 para. 2(b)

F49Words in s. 35(3)(d) substituted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 58(4)

F50S. 35(3)(d)(xvi) inserted (E.W.S.) (8.6.2005 for specified purposes, 24.7.2005 in so far as not already in force) by Railways Act 2005 (c. 14), s. 60(2), Sch. 10 para. 33; S.I. 2005/1444, art. 2(1), Sch. 1; S.I. 2005/1909, art. 2, Sch.

F51Words in s. 35(4) substituted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 58(5)

F52Words in s. 35(5) substituted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 58(6)

F53Words in s. 35(6) substituted (with effect in accordance with s. 135(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 35(a)

F54S. 35(6)(a)(aa)(b) substituted for s. 35(6)(a)(b) (with effect in accordance with s. 135(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 35(b)

F55S. 35(6)(a) omitted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 2 para. 58(7)(a)

F56Words in s. 35(6)(aa) omitted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 2 para. 58(7)(b)

F57Words in s. 35(6)(b) omitted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 2 para. 58(7)(c)

F58Words in s. 35(7) substituted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 58(8)

F59Words in s. 35(9) inserted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 58(9)

F60Words in s. 35(10) inserted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 58(10)

[F6135ADisposal of asset acquired on no gain/no loss disposalU.K.

(1)This section applies for the purposes of capital gains tax in relation to a disposal of an asset if—

(a)the person making the disposal acquired the asset after 31 March 1982 and before 6 April 2008,

(b)the disposal by which the person acquired the asset (“the relevant disposal”), and any previous disposal of the asset after 31 March 1982, was a disposal on which, by virtue of any enactment, neither a gain nor a loss accrued to the person making the disposal, and

(c)section 35(2) did not apply to the relevant disposal.

(2)It is to be assumed that section 35(2) did apply to the relevant disposal (and that section 56(2) applied to the relevant disposal accordingly).]

Textual Amendments

F61S. 35A inserted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 59

36 Deferred charges on gains before 31st March 1982.U.K.

Schedule 4, which provides for the reduction of a deferred charge to [F62corporation tax in respect of chargeable gains] where the charge is wholly or partly attributable to an increase in the value of an asset before 31st March 1982, shall have effect.

Textual Amendments

F62Words in s. 36 substituted (with effect in accordance with Sch. 2 para. 76 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 73

[F63Re-basing for non-residents for UK land etc held on 5 April 2019 U.K.

Textual Amendments

F63S. 36A and cross-heading inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 4

36ARe-basing in relation to direct or indirect disposals of UK landU.K.

Schedule 4AA makes provision for the re-basing of assets where—

(a)the assets are held on 5 April 2019,

(b)there is a disposal after that date, and

(c)the disposal is a direct or indirect disposal of UK land (within the meaning of that Schedule).]

Allowable deductionsU.K.

37 Consideration chargeable to tax on income.U.K.

(1)There shall be excluded from the consideration for a disposal of assets taken into account in the computation of the gain any money or money’s worth charged to income tax as income of, or taken into account as a receipt in computing income or profits or gains or losses of, the person making the disposal for the purposes of the Income Tax Acts.

[F64(1A)There is to be excluded from the consideration for a disposal of an asset taken into account in the computation of the gain a sum equal to any amount that is taken into account by the person making the disposal as a receipt under section 96A or 307E of ITTOIA 2005 (capital receipts under, or after leaving, cash basis) as a result of the operation of any deemed disposal provision in relation to the asset.

(1B)But subsection (1A) applies only to the extent that the sum has not been excluded from the consideration for an earlier disposal of the asset.

(1C)The following are “deemed disposal provisions”—

(a)in relation to trades, professions and vocations, subsections (4) and (5) of section 96A of ITTOIA 2005 (which provide for circumstances in which a person is to be regarded as disposing of an asset for the purposes of that section), and

(b)in relation to property businesses, section 307F of ITTOIA 2005 (which provides for circumstances in which a person is to be regarded as disposing of an asset for the purposes of section 307E of that Act).]

(2)Subsection (1) above shall not be taken as excluding from the consideration so taken into account any money or money’s worth which is—

[F65(a)taken into account in the making of a balancing charge under the Capital Allowances Act but excluding Part 10 of that Act,

(b)brought into account as the disposal value of plant or machinery under Part 2 of that Act, or

(c)brought into account as the disposal value of an asset representing qualifying expenditure under Part 6 of that Act.]

[F66See also section 37A(4) and (5) (consideration on disposal of certain leases).]

[F67(2A)Subsection (1) is not to be taken as excluding from the consideration so taken into account any money or money's worth which is, or is taken into account in computing, a return on which income tax is charged under Chapter 2A of Part 4 of ITTOIA 2005 (disguised interest) (but see section 381D of that Act).]

(3)This section shall not preclude the taking into account in a computation of the gain, as consideration for the disposal of an asset, of the capitalised value of a rentcharge (as in a case where a rentcharge is exchanged for some other asset) or of the capitalised value of a ground annual or feu duty, or of a right of any other description to income or to payments in the nature of income over a period, or to a series of payments in the nature of income.

F68(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F69(5)If—

(a)because section [F70517G(4) or (6) of ITA 2007 (transactions in land: the chargeable person) applies, an amount is charged to income tax as income of] a person other than the person (“A”) by whom the gain was realised, and

(b)the income tax has been paid,

for the purposes of this section the amount charged to that tax is regarded as having been charged as the income of A.

[F71(5A)If—

(a)because section [F72356OG(4) or (6) of CTA 2010 (transactions in land: the chargeable company) applies, an amount is charged to corporation tax as profits of a person other than] the person (“C”) by whom the gain was realised, and

(b)the corporation tax has been paid,

for the purposes of this section the amount charged to that tax is regarded as having been charged as the income of C.]

(6)If—

(a)because section 777(5) of that Act applies, the person charged to tax under Chapter 4 of Part 13 of that Act (sales of occupation income) is a person other than the person (“B”)—

(i)for whom the capital amount was obtained, or

(ii)in the case of income treated as arising under section 779 of that Act, by whom the property or right was sold or realised, and

(b)the income tax has been paid,

for the purposes of this section the amount charged to that tax is regarded as having been charged as the income of B.

(7)In subsection (6) “capital amount” has the same meaning as in Chapter 4 of Part 13 of that Act (sales of occupation income) (see section 777(7) of that Act).]

Textual Amendments

F64S. 37(1A)-(1C) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 44

F65S. 37(2)(a)-(c) substituted for s. 37(2)(a)(b) (22.3.2001) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 77

F66Words in s. 37(2) added (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 231 (with Sch. 9 paras. 1-9, 22)

F67S. 37(2A) inserted (with effect in accordance with Sch. 12 para. 18(1) of the amending Act) by Finance Act 2013 (c. 29), Sch. 12 para. 6

F69S. 37(5)-(7) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 299 (with Sch. 2)

F70Words in s. 37(5)(a) substituted (with effect in accordance with s. 82 of the amending Act) by Finance Act 2016 (c. 24), s. 79(8) (with savings in 2017 c. 32, s. 39(1)(2))

F71S. 37(5A) inserted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 228 (with Sch. 2)

F72Words in s. 37(5A)(a) substituted (with effect in accordance with s. 81 of the amending Act) by Finance Act 2016 (c. 24), s. 77(7) (with savings in 2017 c. 32, s. 39(1)(2))

Modifications etc. (not altering text)

C114S. 37 extended (27.7.1993 with effect for the year 1992-93 and subsequent years of assessment as mentioned in s. 184(3)) by 1993 c. 34, ss. 176(2)(b), 184(3)

C115S. 37 excluded (19.3.1997) by Finance Act 1997 (c. 16), Sch. 12 para. 12(1)(2)(3)(4), 13, 14 (with Sch. 12 para. 17)

C116S. 37 excluded (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 670(7), 1329(1) (with Sch. 2 Pts. 1, 2)

C117S. 37 excluded (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 672(4), 1329(1) (with Sch. 2 Pts. 1, 2)

C118S. 37(1) restricted (16.7.1992, with effect as mentioned in s. 65(6) of the amending Act) by 1992 c. 48, s. 65(2)(e)(5)

C119S. 37(1) modified (22.7.2004) by Finance Act 2004 (c. 12), s. 133(5)(a)

C120S. 37(1) modified (with effect in accordance with art. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 45(2)

[F7337AConsideration on disposal of certain leasesU.K.

(1)This section applies if—

(a)a disposal occurs that is within section 614BP of ITA 2007 (including that section as it has effect as a result of section 614CD of that Act), and

(b)for the purposes of Chapter 2 or 3 of Part 11A of that Act there is any cumulative accountancy rental excess in relation to the lease for the period of account of the current lessor in which the disposal takes place.

(2)This section also applies if—

(a)a disposal occurs that is within section 915 of CTA 2010 (including that section as it has effect as a result of section 929 of that Act), and

(b)for the purposes of Chapter 2 or 3 of Part 21 of that Act there is any cumulative accountancy rental excess in relation to the lease for the period of account of the current lessor in which the disposal takes place.

(3)In determining for the purposes of this Act the amount of any gain accruing to the person making the disposal, the consideration for the disposal is treated as reduced by setting against it that excess (but not so as to reduce the amount of that consideration below nil).

(4)Subsection (3) only affects section 37 so far as subsection (5) provides.

(5)Section 37 does not exclude any money or money's worth from the consideration for a disposal so far as it is represented by any such cumulative accountancy rental excess that, in accordance with subsection (3)—

(a)falls to be set against the consideration for the disposal, or

(b)has fallen to be set against the consideration for a previous disposal made by the person making the disposal in question or a person connected with that person.

(6)Subsections (7) to (9) apply if the disposal mentioned in subsection (1) or (2) is a part disposal of the asset in question.

(7)The cumulative accountancy rental excess mentioned in subsection (3) must be apportioned between—

(a)the property disposed of, and

(b)the property that remains undisposed of.

(8)That apportionment must be made in the same proportions as those in which the sums that under section 38(1)(a) or (b) are attributable to the asset fall to be apportioned under section 42.

(9)Only so much of the cumulative accountancy rental excess as is so apportioned to the property disposed of is set against the consideration for the part disposal in accordance with subsection (3).

(10)If subsection (3) applies in a case where two or more disposals within subsection (1) or (2) are made at the same time, the cumulative accountancy rental excess mentioned in subsection (3) must be apportioned, subject to subsections (7) to (9), between the disposals in such proportions as are just and reasonable.

(11)Section 614DC of ITA 2007 (connected persons) applies for the purposes of this section in its application as a result of any leasing arrangements (within the meaning of that section) as it applies for the purposes mentioned in that section.]

Textual Amendments

F73S. 37A inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 3 para. 7 (with Sch. 9 paras. 1-9, 22)

[F7437BConsideration on certain disposals: structures and buildings allowancesU.K.

(1)This section applies on the disposal of an asset by a person if—

(a)the asset is an interest in a building or structure which is “an interest in UK land” (as defined in section 1C) or an equivalent interest in land outside the United Kingdom,

(b)the person is, or has been, entitled to an allowance under Part 2A of CAA 2001 (“the structures and buildings allowance”) by reference to the building or structure, and

(c)the expenditure by reference to which the structures and buildings allowance has been made is allowable under section 38 as a deduction from the consideration in the computation of the gain on the disposal.

(2)In determining the amount of any gain accruing to the person making the disposal (the “transferor”) the consideration for the disposal is treated as being increased by an amount equal to the amount of the structures and buildings allowance that has been made to the transferor.

(3)If the disposal is—

(a)a disposal on which, by virtue of any of the no gain/no loss provisions, neither a gain nor a loss accrues to the person making the disposal,

(b)a disposal in respect of which section 162 (roll-over relief on transfer of business) applies for the purposes of computing the gain on the disposal, or

(c)a deemed disposal under section 579(4) of CTA 2010 (real estate investment trusts: cessation),

the person who acquires the asset (the “transferee”) is treated, for the purposes of determining the amount of the gain accruing on any subsequent disposal of the asset by the transferee, as if the amount of structures and buildings allowance made to the transferor (see subsection (2)) had been made to the transferee.

(4)Subsection (2)—

(a)is to be applied after the other provisions of this Act which apply for the purposes of determining the amount of the consideration deemed to be given for the disposal of assets, and

(b)is subject to subsections (5) to (7).

(5)If section 45(3) or 47(2) applies in relation to the disposal, subsection (2) applies in relation to the part of the consideration apportioned in the same proportion as the expenditure qualifying for capital allowances.

(6)Subsection (7) applies in relation to the disposal if the asset mentioned in subsection (1) is—

(a)a leasehold interest by reference to which section 270DD of CAA 2001 (leases granted for 35 years or more) applies, and

(b)a wasting asset for the purposes of this Act.

(7)For the purposes of subsection (2), the amount of the structures and buildings allowance is to be treated as if it were an amount of expenditure attributable to the asset under section 38(1) and, accordingly, as if it had been reduced at the same rate at which that expenditure is written off in accordance with paragraph 1(3) and (4) of Schedule 8 (leases of land as wasting assets).

(8)The reference in subsection (1)(b) to an allowance under Part 2A of CAA 2001 includes a reference to a contribution allowance made by reason of the application of sections 537 and 538A of that Act (contribution allowances: structures and buildings allowances).]

38 Acquisition and disposal costs etc.U.K.

(1)Except as otherwise expressly provided, the sums allowable as a deduction from the consideration in the computation of the gain accruing to a person on the disposal of an asset shall be restricted to—

(a)the amount or value of the consideration, in money or money’s worth, given by him or on his behalf wholly and exclusively for the acquisition of the asset, together with the incidental costs to him of the acquisition or, if the asset was not acquired by him, any expenditure wholly and exclusively incurred by him in providing the asset,

(b)the amount of any expenditure wholly and exclusively incurred on the asset by him or on his behalf for the purpose of enhancing the value of the asset, being expenditure reflected in the state or nature of the asset at the time of the disposal, and any expenditure wholly and exclusively incurred by him in establishing, preserving or defending his title to, or to a right over, the asset,

(c)the incidental costs to him of making the disposal.

(2)For the purposes of this section and for the purposes of all other provisions of this Act, the incidental costs to the person making the disposal of the acquisition of the asset or of its disposal shall consist of expenditure wholly and exclusively incurred by him for the purposes of the acquisition or, as the case may be, the disposal, being fees, commission or remuneration paid for the professional services of any surveyor or valuer, or auctioneer, or accountant, or agent or legal adviser and costs of transfer or conveyance (including stamp duty [F75or stamp duty land tax]) together—

(a)in the case of the acquisition of an asset, with costs of advertising to find a seller, and

(b)in the case of a disposal, with costs of advertising to find a buyer and costs reasonably incurred in making any valuation or apportionment required for the purposes of the computation of the gain, including in particular expenses reasonably incurred in ascertaining market value where required by this Act.

(3)Except as provided by section 40, no payment of interest shall be allowable under this section.

(4)Any provision in this Act introducing the assumption that assets are sold and immediately reacquired shall not imply that any expenditure is incurred as incidental to the sale or reacquisition.

Textual Amendments

F75Words in s. 38(2) inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 18 para. 5

Modifications etc. (not altering text)

C121S. 38 restricted (3.5.1994) by Finance Act 1994 (c. 9), s. 173(4)(d) (with s. 173(1))

C122S. 38(1)(a)(b) restricted (5.10.2004) by Energy Act 2004 (c. 20), s. 198(2), Sch. 9 para. 4(2) (with s. 38(2)); S.I. 2004/2575, art. 2(1), Sch. 1

C123S. 38(1)(c) applied by Finance Act 1996 (c. 8), s. 92(5D) (as inserted (with effect in accordance with s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), Sch. 23 para. 5(3))

39 Exclusion of expenditure by reference to tax on income.U.K.

(1)There shall be excluded from the sums allowable under section 38 as a deduction in the computation of the gain any expenditure allowable as a deduction in computing the [F76profits] or losses of a trade, profession or vocation for the purposes of income tax or allowable as a deduction in computing any other income or profits or gains or losses for the purposes of the Income Tax Acts and any expenditure which, although not so allowable as a deduction in computing any losses, would be so allowable but for an insufficiency of income or profits or gains; and this subsection applies irrespective of whether effect is or would be given to the deduction in computing the amount of tax chargeable or by discharge or repayment of tax or in any other way.

(2)Without prejudice to the provisions of subsection (1) above, there shall be excluded from the sums allowable under section 38 as a deduction in the computation of the gain any expenditure which, if the assets, or all the assets to which the computation relates, were, and had at all times been, held or used as part of the fixed capital of a trade the [F76profits] of which were (irrespective of whether the person making the disposal is a company or not) chargeable to income tax would be allowable as a deduction in computing the [F76profits] or losses of the trade for the purposes of income tax.

(3)No account shall be taken of any relief under Chapter II of Part IV of the M1Finance Act 1981 or under Schedule 5 to the M2Finance Act 1983, in so far as it is not withdrawn and relates to shares issued before 19th March 1986, in determining whether any sums are excluded by virtue of subsection (1) or (2) above from the sums allowable as a deduction in the computation of gains or losses for the purposes of this Act.

[F77(3A)This section is not to be taken as excluding, from the sums allowable under section 38 as a deduction in the computation of the gain, expenditure allowable as a deduction in computing a return on which income tax is charged under Chapter 2A of Part 4 of ITTOIA 2005 (disguised interest) (but see section 381D of that Act).]

[F78(3B)This section is not to be taken as excluding, from the sums allowable under section 38 as a deduction in the computation of the gain, any expenditure in respect of which an allowance under Part 2A of CAA 2001 (structures and buildings allowances) is made.]

[F79(4)If—

(a)because section [F80517G(4) or (6) of ITA 2007 (transactions in land: the chargeable person) applies, an amount is charged to income tax as income of] a person other than the person (“A”) by whom the gain was realised, and

(b)the income tax has been paid,

for the purposes of this section the amount charged to that tax is regarded as having been charged as the income of A.]

[F81(5)If—

(a)because section [F82356OG(4) or (6) of CTA 2010 (transactions in land: the chargeable company) applies, an amount is charged to corporation tax as profits of a person other than] the person (“B”) by whom the gain was realised, and

(b)the corporation tax has been paid,

for the purposes of this section the amount charged to that tax is regarded as having been charged as the income of B.]

Textual Amendments

F76Word in s. 39(1)(2) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3)(a), Sch. 7 para. 7

F77S. 39(3A) inserted (with effect in accordance with Sch. 12 para. 18(1) of the amending Act) by Finance Act 2013 (c. 29), Sch. 12 para. 7

F79S. 39(4) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 300 (with Sch. 2)

F80Words in s. 39(4)(a) substituted (with effect in accordance with s. 82 of the amending Act) by Finance Act 2016 (c. 24), s. 79(9) (with savings in 2017 c. 32, s. 39(1)(2))

F81S. 39(5) inserted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 229 (with Sch. 2)

F82Words in s. 39(5)(a) substituted (with effect in accordance with s. 81 of the amending Act) by Finance Act 2016 (c. 24), s. 77(8) (with savings in 2017 c. 32, s. 39(1)(2))

Modifications etc. (not altering text)

C124S. 39 extended (27.7.1993 with effect for the years 1992-93 and subsequent years of assessment as mentioned in s. 184(3)) by 1993 c. 34, s. 176(2)(b), 184(3)

C125S. 39 excluded (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 670(7), 1329(1) (with Sch. 2 Pts. 1, 2)

C126S. 39 excluded (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 672(4), 1329(1) (with Sch. 2 Pts. 1, 2)

C127S. 39 extended (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 1157(2), 1329(1) (with Sch. 2 Pts. 1, 2)

C128S. 39(1) modified (22.7.2004) by Finance Act 2004 (c. 12), s. 133(5)(b)

Marginal Citations

[F8339AExclusion of certain expenditure: structures and buildings allowancesU.K.

(1)This section applies if—

(a)a person disposes of an asset to a connected person,

(b)the asset is, or is an interest in, a building or structure by reference to which an allowance under Part 2A of CAA 2001 (a “structures and buildings allowance”) has been made, and

(c)the person making the disposal is, or has been, a lessor in relation to a lease of the building or structure by reference to which section 270DD of CAA 2001 (leases granted for 35 years or more) applies.

(2)Any expenditure by reference to which a structures and buildings allowance has been made to a lessee in relation to the lease mentioned in subsection (1)(c) is to be excluded from the sums allowable under section 38 as a deduction in the computation of the gain.]

40 Interest charged to capital.U.K.

(1)Where—

(a)a company incurs expenditure on the construction of any building, structure or works, being expenditure allowable as a deduction under section 38 in computing a gain accruing to the company on the disposal of the building, structure or work, or of any asset comprising it, and

(b)that expenditure was defrayed out of borrowed money,

the sums so allowable under section 38 shall, subject to subsection (2) below, include the amount of any interest on that borrowed money which is referable to a period or part of a period ending on or before the disposal.

(2)Subsection (1) above has effect subject to section 39 and does not apply to interest which is a charge on income.

(3)In relation to interest paid in any accounting period ending before 1st April 1981 subsection (1) above shall have effect with the substitution for all following paragraph (b) of—

and

(c)the company charged to capital all or any of the interest on that borrowed money referable to a period or part of a period ending on or before the disposal,

and the sums so allowable under section 38 shall include the amount of that interest charged to capital. ;

and subsection (2) above shall not apply.

[F84(4)In consequence of Chapter 2 of Part 4 of the Finance Act 1996 (c. 8) (loan relationships) [F85and CTA 2009 (Part 5 of which re-enacts that Chapter)] this section does not have effect in relation to interest referable to an accounting period ending on or after 1st April 1996.]

Textual Amendments

F84S. 40(4) added (24.7.2002) by Finance Act 2002 (c. 23), Sch. 25 para. 60(2)

F85Words in s. 40(4) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 362 (with Sch. 2 Pts. 1, 2)

41 Restriction of losses by reference to capital allowances and renewals allowances.U.K.

(1)Section 39 shall not require the exclusion from the sums allowable as a deduction in the computation of the gain of any expenditure as being expenditure in respect of which a capital allowance or renewals allowance is made, but the amount of any losses accruing on the disposal of an asset shall be restricted by reference to capital allowances and renewals allowances as follows.

(2)In the computation of the amount of a loss accruing to the person making the disposal, there shall be excluded from the sums allowable as a deduction any expenditure to the extent to which any capital allowance or renewals allowance has been or may be made in respect of it.

(3)If the person making the disposal acquired the asset—

[F86(a)by a transfer by way of sale in relation to which an election under section 569 of the Capital Allowances Act was made, or

(b)by a transfer to which section 268 of that Act applies,]

(being enactments under which a transfer is treated for the purposes of capital allowances as being made at written down value), the preceding provisions of this section shall apply as if any capital allowance made to the transferor in respect of the asset had (except so far as any loss to the transferor was restricted under those provisions) been made to the person making the disposal (that is the transferee); and where the transferor acquired the asset by such a transfer, capital allowances which by virtue of this subsection can be taken into account in relation to the transferor shall also be taken into account in relation to the transferee (that is the person making the disposal), and so on for any series of transfers before the disposal.

(4)In this section “capital allowance” means—

[F87(a)any allowance under the Capital Allowances Act,]

[F88(zaa)any deduction allowable in respect of capital expenditure in calculating profits on the cash basis (see sections 33A and 307B of ITTOIA 2005),]

[F89(aa)any deduction under section 311A of ITTOIA 2005 or section 250A of CTA 2009 (replacement domestic items relief),]

(b)F90... [F91any deduction under section 315 of ITTOIA 2005] [F92or section 254 of CTA 2009] (expenditure on sea walls), and

(c)any deduction in computing [F93profits] allowable under F94... [F95section 170 of ITTOIA 2005] [F96or section 147 of CTA 2009] (cemeteries).

[F97(4A)But references in this section to a capital allowance do not include references to an allowance under Part 2A of CAA 2001 (structures and buildings allowances).]

(5)In this section “renewals allowance” means a deduction allowable in computing the [F93profits] of a trade, profession or vocation for the purpose of income tax by reference to the cost of acquiring an asset for the purposes of the trade, profession or vocation in replacement of another asset, and for the purposes of this Chapter a renewals allowance shall be regarded as a deduction allowable in respect of the expenditure incurred on the asset which is being replaced.

(6)The amount of capital allowances to be taken into account under this section in relation to a disposal include any allowances falling to be made by reference to the event which is the disposal, and there shall be deducted from the amount of the allowances the amount of any balancing charge to which effect has been or is to be given by reference to the event which is the disposal, or any earlier event.

[F98(6A)Where—

(a)capital allowances have been made or may be made in respect of expenditure, and

(b)the capital allowances include a deduction mentioned in subsection (4)(zaa),

the capital allowances to be taken into account under this section are to be regarded as equal to the total amount of expenditure which has qualified for capital allowances less any balancing charge to which the person making the disposal is liable under the Capital Allowances Act.]

(7)Where the disposal is of [F99plant or machinery] in relation to expenditure on which allowances or charges have been made under [F100Part 2 of the Capital Allowances Act, [F101and subsection (6A) does not apply,] and neither Chapter 15 (assets provided or used only partly for qualifying activity) nor Chapter 16 (partial depreciation subsidies) of that Part] applies, the capital allowances to be taken into account under this section are to be regarded as equal to the difference between the [F102qualifying expenditure] incurred, or treated as incurred, under that Part on the provision of the [F99plant or machinery] by the person making the disposal and the disposal value required to be brought into account in respect of the [F99plant or machinery].

[F103(8)Where there is a disposal of an asset acquired in circumstances in which—

(a)section 140A applies, or

(b)section 171 applies or would apply but for subsection (2) of that section,

this section has effect in relation to capital allowances made to the person from which it was acquired (so far as not taken into account in relation to a disposal of the asset by that person), and so on as respects previous transfers of the asset in such circumstances.

This does not affect the consideration for which an asset is deemed under section 140A or 171 to be acquired.]

[F104(9)In this section—

(a)in relation to a trade, profession or vocation, references to calculating profits on the cash basis are to calculating the profits of a trade, profession or vocation in relation to which an election under section 25A of ITTOIA 2005 (cash basis for trades) has effect, and

(b)in relation to a property business, references to calculating profits on the cash basis are to be construed in accordance with section 271D of that Act (calculation of profits of property businesses on the cash basis).

(10)In this section—

Textual Amendments

F86S. 41(3)(a)(b) substituted (22.3.2001) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 78(1)

F87S. 41(4)(a) substituted (22.3.2001) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 78(2)

F88S. 41(4)(zaa) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 45(2)

F89S. 41(4)(aa) inserted (with effect in accordance with s. 73(8)(9) of the amending Act) by Finance Act 2016 (c. 24), s. 73(3)

F90Words in s. 41(4)(b) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 363(a)(i), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F91Words in s. 41(4)(b) inserted (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 430(a) (with Sch. 2)

F92Words in s. 41(4)(b) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 363(a)(ii) (with Sch. 2 Pts. 1, 2)

F93Word in s. 41(4)(5) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3)(a), Sch. 7 para. 7

F94Words in s. 41(4)(c) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 363(b)(i), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F95Words in s. 41(4)(c) inserted (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 430(b) (with Sch. 2)

F96Words in s. 41(4)(c) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 363(b)(ii) (with Sch. 2 Pts. 1, 2)

F98S. 41(6A) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 45(3)

F99Words in s. 41(7) substituted (22.3.2001) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 78(3)(a)

F100Words in s. 41(7) substituted (22.3.2001) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 78(3)(b)

F101Words in s. 41(7) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 45(4)

F102Words in s. 41(7) substituted (22.3.2001) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 78(3)(c)

F103S. 41(8) added (with effect in accordance with Sch. 29 para. 12(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 29 para. 12(1) (with Sch. 29 para. 46(5))

F104S. 41(9)(10) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 45(5)

Modifications etc. (not altering text)

C129S. 41 modified (16.7.1992)) by 1992 c. 48, s. 77, Sch. 17 paras. 6(2)(5),7

C130S. 41 modified (19.9.1994) by Coal industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 21(2)(5)(6) (with Sch. 4 para. 14); S.I. 1994/2189, art. 2, Sch.

C131S. 41(8) modified (15.1.2001) by Transport Act 2000 (c. 38), s. 275(1), Sch. 26 para. 10(1) (with Sch. 26 para. 10(2)); S.I. 2000/3376, art. 2

[F10541ARestriction of losses: long funding leases of plant or machineryU.K.

(1)This section applies where a person disposes of an asset—

(a)which includes plant or machinery which is a fixture for the purposes of Chapter 6A of Part 2 of the Capital Allowances Act, and

(b)which he has used for the purpose of leasing under one or more long funding leases.

(2)In the computation of the amount of a loss accruing to the person on the disposal there shall be excluded from the sums allowable as a deduction by virtue of section 38(1)(a) and (b) (acquisition and enhancement costs) an amount determined in accordance with subsection (3) or (4).

(3)Where the person has used the plant or machinery for the purpose of leasing under one long funding lease, the amount is equal to the fall in value of the plant or machinery during the period of the lease.

(4)Where the person has used the plant or machinery for the purpose of leasing under more than one long funding lease, the amount is equal to the sum of the fall in value of the plant or machinery during the period of each lease.

(5)In this section, references to the fall in value of plant or machinery during the period of a lease are references to the amount (if any) by which—

(a)the market value of the plant or machinery at the commencement of the term of the lease,

exceeds

(b)its market value at the termination of the lease.

(6)For the purposes of this section, the following expressions have the meaning given in Chapter 6A of Part 2 of the Capital Allowances Act (interpretation of provisions about long funding leases)—

Textual Amendments

F105S. 41A inserted (with effect in accordance with Sch. 9 para. 5(2) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 5(1)

42 Part disposals.U.K.

(1)Where a person disposes of an interest or right in or over an asset, and generally wherever on the disposal of an asset any description of property derived from that asset remains undisposed of, the sums which under paragraphs (a) and (b) of section 38(1) are attributable to the asset shall, both for the purposes of the computation of the gain accruing on the disposal and for the purpose of applying this Part in relation to the property which remains undisposed of, be apportioned.

(2)The apportionment shall be made by reference—

(a)to the amount or value of the consideration for the disposal on the one hand (call that amount or value A), and

(b)to the market value of the property which remains undisposed of on the other hand (call that market value B),

and accordingly the fraction of the said sums allowable as a deduction in the computation of the gain accruing on the disposal shall be—

and the remainder shall be attributed to the property which remains undisposed of.

(3)Any apportionment to be made in pursuance of this section shall be made before operating the provisions of section 41 and if, after a part disposal, there is a subsequent disposal of an asset the capital allowances or renewals allowances to be taken into account in pursuance of that section in relation to the subsequent disposal shall, subject to subsection (4) below, be those referable to the sums which under paragraphs (a) and (b) of section 38(1) are attributable to the asset whether before or after the part disposal, but those allowances shall be reduced by the amount (if any) by which the loss on the earlier disposal was restricted under the provisions of section 41.

(4)This section shall not be taken as requiring the apportionment of any expenditure which, on the facts, is wholly attributable to what is disposed of, or wholly attributable to what remains undisposed of.

(5)It is hereby declared that this section, and all other provisions for apportioning on a part disposal expenditure which is deductible in computing a gain, are to be operated before the operation of, and without regard to, section 58(1), sections 152 to 158 (but without prejudice to section 152(10)), section 171(1) or any other enactment making an adjustment to secure that neither a gain nor a loss occurs on a disposal.

Modifications etc. (not altering text)

C132S. 42(2) applied (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 667(2), 1329(1) (with Sch. 2 Pts. 1, 2)

C133S. 42(2) applied (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 668(2), 1329(1) (with Sch. 2 Pts. 1, 2)

C134S. 42(2) applied (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 670(5), 1329(1) (with Sch. 2 Pts. 1, 2)

43 Assets derived from other assets.U.K.

If and so far as, in a case where assets have been merged or divided or have changed their nature or rights or interests in or over assets have been created or extinguished, the value of an asset is derived from any other asset in the same ownership, an appropriate proportion of the sums allowable as a deduction in the computation of a gain in respect of the other asset under paragraphs (a) and (b) of section 38(1) shall, both for the purpose of the computation of a gain accruing on the disposal of the first-mentioned asset and, if the other asset remains in existence, on a disposal of that other asset, be attributed to the first-mentioned asset.

Wasting assetsU.K.

44 Meaning of “wasting asset".U.K.

(1)In this Chapter “wasting asset” means an asset with a predictable life not exceeding 50 years but so that—

(a)freehold land shall not be a wasting asset whatever its nature, and whatever the nature of the buildings or works on it;

(b)life”, in relation to any tangible movable property, means useful life, having regard to the purpose for which the tangible assets were acquired or provided by the person making the disposal;

(c)plant and machinery shall in every case be regarded as having a predictable life of less than 50 years, and in estimating that life it shall be assumed that its life will end when it is finally put out of use as being unfit for further use, and that it is going to be used in the normal manner and to the normal extent and is going to be so used throughout its life as so estimated;

(d)a life interest in settled property shall not be a wasting asset until the predictable expectation of life of the life tenant is 50 years or less, and the predictable life of life interests in settled property and of annuities shall be ascertained from actuarial tables approved by the Board.

(2)In this Chapter “the residual or scrap value”, in relation to a wasting asset, means the predictable value, if any, which the wasting asset will have at the end of its predictable life as estimated in accordance with this section.

(3)The question what is the predictable life of an asset, and the question what is its predictable residual or scrap value at the end of that life, if any, shall, so far as those questions are not immediately answered by the nature of the asset, be taken, in relation to any disposal of the asset, as they were known or ascertainable at the time when the asset was acquired or provided by the person making the disposal.

45 Exemption for certain wasting assets.U.K.

(1)Subject to the provisions of this section, no chargeable gain shall accrue on the disposal of, or of an interest in, an asset which is tangible movable property and which is a wasting asset.

(2)Subsection (1) above shall not apply to a disposal of, or of an interest in, an asset—

(a)if, from the beginning of the period of ownership of the person making the disposal to the time when the disposal is made, the asset has been used and used solely for the purposes of a trade, profession or vocation and if that person has claimed or could have claimed any capital allowance in respect of any expenditure attributable to the asset or interest under paragraph (a) or paragraph (b) of section 38(1); or

(b)if the person making the disposal has incurred any expenditure on the asset or interest which has otherwise qualified in full for any capital allowance.

(3)In the case of the disposal of, or of an interest in, an asset which, in the period of ownership of the person making the disposal, has been used partly for the purposes of a trade, profession or vocation and partly for other purposes, or has been used for the purposes of a trade, profession or vocation for part of that period, or which has otherwise qualified in part only for capital allowances—

(a)the consideration for the disposal, and any expenditure attributable to the asset or interest by virtue of section 38(1)(a) and (b), shall be apportioned by reference to the extent to which that expenditure qualified for capital allowances, and

(b)the computation of the gain shall be made separately in relation to the apportioned parts of the expenditure and consideration, and

(c)subsection (1) above shall not apply to any gain accruing by reference to the computation in relation to the part of the consideration apportioned to use for the purposes of the trade, profession or vocation, or to the expenditure qualifying for capital allowances.

[F106(3A)But subsection (3) does not apply in the case of a disposal in relation to which subsection (3B) disapplies subsection (1).

(3B)Subsection (1) does not apply to a disposal of, or of an interest in, an asset if—

(a)at any time in the period of ownership of the person making the disposal, the asset is used for the purposes of a trade, profession or vocation carried on by another person,

(b)as a result of that use, the asset becomes plant,

(c)but for the asset therefore being regarded under section 44(1)(c) as having a predictable life of less than 50 years, the disposal would not be of, or of an interest in, a wasting asset, and

(d)the disposal is not within subsection (3C).

(3C)A disposal of, or of an interest in, an asset is within this subsection if the asset is plant used for the purpose of leasing under a long funding lease and—

(a)the disposal takes place after the commencement of the term of the lease but before the termination of the lease, or

(b)the disposal is the deemed disposal of the asset under section 25A(3)(a) on the termination of the lease.

(3D)Section 25A(5) applies for the purposes of subsection (3C).]

(4)Subsection (1) above shall not apply to a disposal of commodities of any description by a person dealing on a terminal market or dealing with or through a person ordinarily engaged in dealing on a terminal market.

Textual Amendments

F106S. 45(3A)-(3D) inserted (with effect in accordance with s. 40(2) of the amending Act) by Finance Act 2015 (c. 11), s. 40(1)

46 Straightline restriction of allowable expenditure.U.K.

(1)In the computation of the gain accruing on the disposal of a wasting asset it shall be assumed—

(a)that any expenditure attributable to the asset under section 38(1)(a) after deducting the residual or scrap value, if any, of the asset, is written off at a uniform rate from its full amount at the time when the asset is acquired or provided to nothing at the end of its life, and

(b)that any expenditure attributable to the asset under section 38(1)(b) is written off from the full amount of that expenditure at the time when that expenditure is first reflected in the state or nature of the asset to nothing at the end of its life,

so that an equal daily amount is written off day by day.

(2)Thus, calling the predictable life of a wasting asset at the time when it was acquired or provided by the person making the disposal L, the period from that time to the time of disposal T(1), and, in relation to any expenditure attributable to the asset under section 38(1)(b), the period from the time when that expenditure is first reflected in the state or nature of the asset to the said time of disposal T(2), there shall be excluded from the computation of the gain—

(a)out of the expenditure attributable to the asset under section 38(1)(a) a fraction—

of an amount equal to the amount of that expenditure minus the residual or scrap value, if any, of the asset, and

(b)out of the expenditure attributable to the asset under section 38(1)(b) a fraction—

of the amount of the expenditure.

(3)If any expenditure attributable to the asset under section 38(1)(b) creates or increases a residual or scrap value of the asset, the provisions of subsection (1)(a) above shall be applied so as to take that into account.

47 Wasting assets qualifying for capital allowances.U.K.

(1)Section 46 shall not apply in relation to a disposal of an asset—

(a)which, from the beginning of the period of ownership of the person making the disposal to the time when the disposal is made, is used and used solely for the purposes of a trade, profession or vocation and in respect of which that person has claimed or could have claimed any capital allowance in respect of any expenditure attributable to the asset under paragraph (a) or paragraph (b) of section 38(1), or

(b)on which the person making the disposal has incurred any expenditure which has otherwise qualified in full for any capital allowance.

(2)In the case of the disposal of an asset which, in the period of ownership of the person making the disposal, has been used partly for the purposes of a trade, profession or vocation and partly for other purposes, or has been used for the purposes of a trade, profession or vocation for part of that period, or which has otherwise qualified in part only for capital allowances—

(a)the consideration for the disposal, and any expenditure attributable to the asset by paragraph (a) or paragraph (b) of section 38(1) shall be apportioned by reference to the extent to which that expenditure qualified for capital allowances, and

(b)the computation of the gain shall be made separately in relation to the apportioned parts of the expenditure and consideration, and

(c)section 46 shall not apply for the purposes of the computation in relation to the part of the consideration apportioned to use for the purposes of the trade, profession or vocation, or to the expenditure qualifying for capital allowances, and

(d)if an apportionment of the consideration for the disposal has been made for the purposes of making any capital allowance to the person making the disposal or for the purpose of making any balancing charge on him, that apportionment shall be employed for the purposes of this section, and

(e)subject to paragraph (d) above, the consideration for the disposal shall be apportioned for the purposes of this section in the same proportions as the expenditure attributable to the asset is apportioned under paragraph (a) above.

[F107Cash basis accounting U.K.

Textual Amendments

F107Ss. 47A, 47B and cross-heading inserted (with effect in accordance with Sch. 4 paras. 56, 57 of the amending Act) by Finance Act 2013 (c. 29), Sch. 4 para. 45

47A[F108Exemption for certain disposals under, or after leaving, cash basis]U.K.

(1)No chargeable gain shall accrue on the disposal of, or of an interest in, an asset if conditions [F109A, B and D] are met in relation to the asset.

[F110(2)Condition A is that the asset is not land.]

(3)Condition B is that, at any time during the period of ownership of the person making the disposal, the asset has been used for the purposes of a trade, profession[F111, vocation or property business] carried on by the person.

F112(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F113(5)Condition D is that relevant disposal proceeds—

(a)are brought into account as a receipt (whether or not on the cash basis) under section 96A(3I) of ITTOIA 2005 in calculating the profits of a trade, profession or vocation (capital receipts under, or after leaving, cash basis: trades, professions and vocations), or

(b)are brought into account as a receipt (whether or not on the cash basis) under section 307E(12) of that Act in calculating the profits of a property business (capital receipts under, or after leaving, cash basis: property businesses).

(5A)Relevant disposal proceeds” means disposal proceeds as mentioned in section 96A(3F) of ITTOIA 2005 or (as the case may be) section 307E(9) of that Act which arise from the disposal mentioned in subsection (1).]

[F114(6)Subsection (7) applies in the case of the disposal of, or of an interest in, an asset—

(a)which, in the period of ownership of the person making the disposal—

(i)has been used partly for the purposes of the trade, profession or vocation and partly for other purposes, or

(ii)has been used for the purposes of the trade, profession or vocation for part of that period, or

(b)expenditure on which by the person has qualified in part only for capital allowances.]

(7)In such a case—

(a)the consideration for the disposal, and any expenditure attributable to the asset or interest by virtue of section 38(1)(a) and (b), shall be apportioned by reference to the extent to which that expenditure [F115qualified for capital allowances],

(b)the computation of the gain shall be made separately in relation to the apportioned parts of the expenditure and consideration, and

(c)subsection (1) above shall apply to any gain accruing by reference to the computation in relation to the part of the consideration apportioned to use for the purposes of the trade, profession or vocation[F116, or to the expenditure qualifying for capital allowances].

[F117(8)In this section “property business” means a UK property business or an overseas property business within the meaning of Part 3 of ITTOIA 2005 (see sections 264 and 265 of that Act).]]

Textual Amendments

F108S. 47A heading substituted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 46(2)

F109Words in s. 47A(1) substituted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 46(3)

F110S. 47A(2) substituted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 46(4)

F111Words in s. 47A(3) substituted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 46(5)

F112S. 47A(4) omitted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 46(6)

F113S. 47A(5)(5A) substituted for s. 47A(5) (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 46(7)

F114S. 47A(6) substituted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 46(8)

F115Words in s. 47A(7)(a) substituted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 46(9)(a)

F116Words in s. 47A(7)(c) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 46(9)(b)

F117S. 47A(8) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 46(10)

F11847BDisposals made by persons after leaving cash basisU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F118S. 47B omitted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 47

Miscellaneous provisionsU.K.

48 Consideration due after time of disposal.U.K.

[F119(1)] In the computation of the gain consideration for the disposal shall be brought into account without any discount for postponement of the right to receive any part of it and, in the first instance, without regard to a risk of any part of the consideration being irrecoverable or to the right to receive any part of the consideration being contingent; and if any part of the consideration so brought into account [F120subsequently proves to be irrecoverable, there shall be made, on a claim being made to that effect, such adjustment, whether by way of discharge or repayment of tax or otherwise, as is required in consequence].

[F121(2)Subsection (1) above does not apply in relation to so much of any consideration as consists of rights under a creditor relationship to which a company becomes a party as a result of the disposal.

(3)In the computation of the gain in a case where subsection (2) above has effect in relation to any consideration, the amount to be brought into account in respect of that consideration is the fair value of the creditor relationship.

(4)In this section—

(a)creditor relationship”, and

(b)fair value”, in relation to a creditor relationship,

each have the same meaning as in [F122Part 5 of CTA 2009 (see sections 302(5) and 313(6))].]

Textual Amendments

F119S. 48 renumbered as s. 48(1) (20.7.2005) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 7(2)

F120Words in s. 48 substituted (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 48

F121S. 48(2)-(4) added (20.7.2005) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 7(3)

F122Words in s. 48(4) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 364 (with Sch. 2 Pts. 1, 2)

Modifications etc. (not altering text)

C135S. 48 applied (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 208, 1184(1) (with Sch. 2)

[F12348AUnascertainable considerationU.K.

(1)This section applies where—

[F124(a)a person (“P”) has made a disposal (“the original disposal”) on which a relevant non-resident gain or relevant non-resident loss accrued,]

(b)P acquired a right as the whole or part of the consideration for that disposal,

(c)on P's acquisition of the right, there was no corresponding disposal of it, and

(d)the right is a right to unascertainable consideration (see subsections (4) to (6)).

(2)If P subsequently receives consideration (“the ascertained consideration”) representing the whole or part of the consideration referred to in subsection (1)(d) and [F125P is not UK resident for the tax year in which the ascertained consideration is received (as determined for the purposes of Chapter 1 of Part 1)—]

(a)the ascertained consideration is treated as not accruing on the disposal of the right,

(b)the costs of P's acquisition of the right (or, in the case of a part disposal of the right, those costs so far as referable to the part disposed of) are taken to be nil, and

(c)the following steps are taken.

(3)In step 1 in subsection (2), “the relevant original consideration” means the consideration accruing on the original disposal, so far as referable to the right mentioned in subsection (1)(b) (or, in the case of a part disposal of the right, referable to the part disposed of).

(4)A right is a right to unascertainable consideration if, and only if—

(a)it is a right to consideration the amount or value of which is unascertainable at the time when the right is conferred, and

(b)that amount or value is unascertainable at that time on account of its being referable, in whole or in part, to matters which are uncertain at that time because they have not yet occurred.

This subsection is subject to subsections (5) and (6).

(5)The amount or value of any consideration is not to be regarded as being unascertainable by reason only—

(a)that the right to receive the whole or any part of the consideration is postponed or contingent, if the consideration or, as the case may be, that part of it is, in accordance with section 48, brought into account in the computation of the gain accruing to a person on the disposal of an asset, or

(b)in a case where the right to receive the whole or any part of the consideration is postponed and is to be, or may be, to any extent satisfied by the receipt of property of one description or property of some other description, that some person has a right to select the property, or the description of property, that is to be received.

(6)A right is not to be taken to be a right to unascertainable consideration by reason only that either the amount or the value of the consideration has not been fixed, if—

(a)the amount will be fixed by reference to the value, and the value is ascertainable, or

(b)the value will be fixed by reference to the amount, and the amount is ascertainable.

[F127(7)In this section—

Textual Amendments

F123S. 48A inserted (with effect in accordance with Sch. 7 para. 60 of the amending Act) by Finance Act 2015 (c. 11), Sch. 7 para. 14

F124S. 48A(1)(a) substituted (with effect in accordance with Sch. 1 paras. 27(5)(6), 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 27(2)

F125Words in s. 48A(2) substituted (with effect in accordance with Sch. 1 paras. 27(5)(6), 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 27(3)(a)

F126Words in s. 48A(2)(c) substituted (with effect in accordance with Sch. 1 paras. 27(5)(6), 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 27(3)(b)

F127S. 48A(7) inserted (with effect in accordance with Sch. 1 paras. 27(5)(6), 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 27(4)

49 Contingent liabilities.U.K.

(1)In the first instance no allowance shall be made in the computation of the gain—

(a)in the case of a disposal by way of assigning a lease of land or other property, for any liability remaining with, or assumed by, the person making the disposal by way of assigning the lease which is contingent on a default in respect of liabilities thereby or subsequently assumed by the assignee under the terms and conditions of the lease,

(b)for any contingent liability of the person making the disposal in respect of any covenant for quiet enjoyment or other obligation assumed as vendor of land, or of any estate or interest in land, or as a lessor,

(c)for any contingent liability in respect of a warranty or representation made on a disposal by way of sale or lease of any property other than land.

[F128(2)If any such contingent liability subsequently becomes enforceable and is being or has been enforced, there shall be made, on a claim being made to that effect, such adjustment, whether by way of discharge or repayment of tax or otherwise, as is required in consequence.]

(3)Subsection (2) above also applies where the disposal in question was before the commencement of this section.

Textual Amendments

F128S. 49(2) substituted (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 49

50 Expenditure reimbursed out of public money.U.K.

There shall be excluded from the computation of a gain any expenditure which has been or is to be met directly or indirectly by the Crown or by any Government, public or local authority whether in the United Kingdom or elsewhere.

51 Exemption for winnings and damages etc.U.K.

(1)It is hereby declared that winnings from betting, including pool betting, or lotteries or games with prizes are not chargeable gains, and no chargeable gain or allowable loss shall accrue on the disposal of rights to winnings obtained by participating in any pool betting or lottery or game with prizes.

(2)It is hereby declared that sums obtained by way of compensation or damages for any wrong or injury suffered by an individual in his person or in his profession or vocation are not chargeable gains.

52 Supplemental.U.K.

(1)No deduction shall be allowable in a computation of the gain more than once from any sum or from more than one sum.

(2)References in this Chapter to sums taken into account as receipts or as expenditure in computing profits or gains or losses for the purposes of income tax shall include references to sums which would be so taken into account but for the fact that any profits or gains of a trade, profession, employment or vocation are not chargeable to income tax or that losses are not allowable for those purposes.

(3)In this Chapter references to income or profits charged or chargeable to tax include references to income or profits taxed or as the case may be taxable by deduction at source.

(4)For the purposes of any computation of the gain any necessary apportionments shall be made of any consideration or of any expenditure and the method of apportionment adopted shall, subject to the express provisions of this Chapter, be F129... just and reasonable.

(5)In this Chapter “capital allowance” and “renewals allowance” have the meanings given by subsections (4) and (5) of section 41 [F130(and, except in section 41, references in this Chapter to a capital allowance include references to an allowance under Part 2A of CAA 2001 (structures and buildings allowances))].

Textual Amendments

F129Words in s. 52(4) repealed (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 50, Sch. 41 Pt. V(10)

Chapter IVU.K. Computation of gains: the indexation allowance

GeneralU.K.

[F13152AChapter to apply only for corporation tax purposesU.K.

This Chapter applies only for the purposes of corporation tax.]

Textual Amendments

F131S. 52A inserted (with effect in accordance with Sch. 2 para. 83 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 78

53 The indexation allowance and interpretative provisions.U.K.

(1)Subject to any provision to the contrary, [F132if on the disposal of an asset there is an unindexed gain, an allowance (“the indexation allowance”) shall be allowed against the unindexed gain—

(a)so as to give the gain for the purposes of this Act, or

(b)if the indexation allowance equals or exceeds the unindexed gain, so as to extinguish it (in which case the disposal shall be one on which, after taking account of the indexation allowance, neither a gain nor a loss accrues)];

and any reference in this Act to an indexation allowance or to the making of an indexation allowance shall be construed accordingly.

F133(1A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F134(1B)Indexation allowance is not allowed in respect of changes shown by the retail prices indices for months after December 2017.]

(2)For the purposes of [F135this Chapter], in relation to any disposal of an asset—

[F136(a)unindexed gain” means the amount of the gain on the disposal computed in accordance with this Part]; and

(b)relevant allowable expenditure” means, subject to subsection (3) below, any sum which, in the computation of the unindexed [F137gain] was taken into account by virtue of paragraph (a) or paragraph (b) of section 38(1).

[F138(2A)Notwithstanding anything in section 16 of this Act, this section shall not apply to a disposal on which a loss accrues.]

(3)In determining what sum (if any) was taken into account as mentioned in subsection (2)(b) above, account shall be taken of any provision of any enactment which, for the purpose of the computation of the gain, increases, excludes or reduces the whole or any part of any item of expenditure falling within section 38 or provides for it to be written-down.

(4)Sections 54 and 108 and this section have effect subject to sections 56, 57, 109, 110 F139... , 113, 131 and 145.

Textual Amendments

F132Words in s. 53(1) substituted (with effect in accordance with s. 93(11) of the amending Act) by Finance Act 1994 (c. 9), s. 93(1) (with Sch. 12)

F133S. 53(1A) omitted (with effect in accordance with Sch. 2 para. 83 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 2 para. 79(a)

F134S. 53(1B) inserted (with effect in accordance with s. 26(6)(7) of the amending Act) by Finance Act 2018 (c. 3), s. 26(2)

F135Words in s. 53(2) substituted (with effect in accordance with s. 93(11) of the amending Act) by Finance Act 1994 (c. 9), s. 93(2)(a) (with Sch. 12)

F136S. 53(2)(a) substituted (with effect in accordance with s. 93(11) of the amending Act) by Finance Act 1994 (c. 9), s. 93(2)(b) (with Sch. 12)

F137Word in s. 53(2)(b) substituted (with effect in accordance with s. 93(11) of the amending Act) by Finance Act 1994 (c. 9), s. 93(2)(c) (with Sch. 12)

F138S. 53(2A) inserted (with effect in accordance with s. 93(11) of the amending Act) by Finance Act 1994 (c. 9), s. 93(3) (with Sch. 12)

F139Word in s. 53(4) omitted (with effect in accordance with Sch. 2 para. 83 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 2 para. 79(b)

54 Calculation of indexation allowance.U.K.

(1)Subject to any provision to the contrary, the indexation allowance is the aggregate of the indexed rise in each item of relevant allowable expenditure; and, in relation to any such item of expenditure, the indexed rise is a sum produced by multiplying the amount of that item by a figure expressed as a decimal and determined, subject to subsections (2) and (3) below, by the formula—

where—

  • RD is the retail prices index for [F140December 2017]; and

  • RI is the retail prices index for March 1982 or the month in which the expenditure was incurred, whichever is the later.

F141(1A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F142(1B)The references in subsection (1) to an item of allowable expenditure do not include any item of expenditure incurred on or after 1 January 2018.]

(2)If, in relation to any item of expenditure—

(a)the expenditure is attributable to the acquisition of relevant securities, within the meaning of section 108, which are disposed of within the period of 10 days beginning on the day on which the expenditure was incurred, or

(b)RD, as defined in subsection (1) above, is equal to or less than RI, as so defined,

the indexed rise in that item is nil.

(3)If, in relation to any item of expenditure, the figure determined in accordance with the formula in subsection (1) above would, apart from this subsection, be a figure having more than 3 decimal places, it shall be rounded to the nearest third decimal place.

(4)For the purposes of this section—

(a)relevant allowable expenditure falling within paragraph (a) of subsection (1) of section 38 shall be assumed to have been incurred at the time when the asset in question was acquired or provided; and

(b)relevant allowable expenditure falling within paragraph (b) of that subsection shall be assumed to have been incurred at the time when that expenditure became due and payable.

Textual Amendments

F140Words in s. 54(1) substituted (with effect in accordance with s. 26(6)(7) of the amending Act) by Finance Act 2018 (c. 3), s. 26(3)(a)

F141S. 54(1A) omitted (with effect in accordance with Sch. 2 para. 83 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 2 para. 80(3)

F142S. 54(1B) inserted (with effect in accordance with s. 26(6)(7) of the amending Act) by Finance Act 2018 (c. 3), s. 26(3)(b)

55 Assets owned on 31st March 1982 or acquired on a no gain/no loss disposal.U.K.

(1)For the purpose of computing the indexation allowance on a disposal of an asset where, on 31st March 1982, the asset was held by the person making the disposal, it shall be assumed that on that date the asset was sold by the person making the disposal and immediately reacquired by him at its market value on that date.

(2)Except where an election under section 35(5) has effect, neither subsection (1) above nor section 35(2) shall apply for the purpose of computing the indexation allowance in a case where that allowance would be greater if they did not apply.

(3)If under subsection (1) above it is to be assumed that any asset was on 31st March 1982 sold by the person making the disposal and immediately reacquired by him, sections 41 and 47 shall apply in relation to any capital allowance or renewals allowance made in respect of the expenditure actually incurred by him in providing the asset as if it were made in respect of expenditure which, on that assumption, was incurred by him in reacquiring the asset on 31st March 1982.

(4)Where, after 31st March 1982, an asset which was held on that date has been merged or divided or has changed its nature or rights in or over the asset have been created, then, subject to subsection (2) above, subsection (1) above shall have effect to determine for the purposes of section 43 the amount of the consideration for the acquisition of the asset which was so held.

(5)Subsection (6) below applies to a disposal of an asset which is not a no gain/no loss disposal if—

(a)the person making the disposal acquired the asset after 31st March 1982; and

(b)the disposal by which he acquired the asset and any previous disposal of the asset after 31st March 1982 was a no gain/no loss disposal;

and for the purposes of this subsection a no gain/no loss disposal is one on which, by virtue of section 257(2) or 259(2) or any of the [F143no gain/no loss provisions], neither a gain nor a loss accrues (or accrued) to the person making the disposal.

[F144(5A)For the purposes of subsection (5), a disposal is also a no gain/no loss disposal if it is one on which, by virtue of section 195B, 195C or 195E, neither a gain nor a loss accrues to the person making the disposal; but, in such a case, subsection (6)(b) below does not apply.]

(6)Where this subsection applies to a disposal of an asset—

(a)the person making the disposal shall be treated for the purpose of computing the indexation allowance on the disposal as having held the asset on 31st March 1982; F145...

[F146(aa)in the case of a disposal to which paragraph 1A of Schedule 3 applies (certain holdings of shares or securities), the market value of the asset on that date is to be determined in accordance with that paragraph; and]

(b)for the purpose of determining any gain or loss on the disposal, the consideration which, apart from this subsection, that person would be treated as having given for the asset shall be taken to be reduced by deducting therefrom any indexation allowance brought into account by virtue of section 56(2) on any disposal falling within subsection (5)(b) above.

[F147(7)The rules in subsection (8) below apply (after the application of section 53 but before the application of section 35(3) or (4)) to give the gain or loss for the purposes of this Act where—

(a)subsection (6) above applies to the disposal (the “disposal in question”) of an asset by any person (the “transferor”), and

(b)but for paragraph (b) of that subsection, the consideration the transferor would be treated as having given for the asset would include an amount or amounts of indexation allowance brought into account by virtue of section 56(2) on any disposal made before 30th November 1993.

(8)The rules are as follows—

(a)where (apart from this subsection) there would be a loss, an amount equal to the rolled-up indexation shall be added to it so as to increase it,

(b)where (apart from this subsection) the unindexed gain or loss would be nil, there shall be a loss of an amount equal to the rolled-up indexation, and

(c)where (apart from this subsection)—

(i)there would be an unindexed gain, and

(ii)the gain or loss would be nil but the amount of the indexation allowance used to extinguish the gain would be less than the rolled-up indexation,

the difference shall constitute a loss.

(9)In this section the “rolled-up indexation” means, subject to subsections (10) and (11) below, the amount or, as the case may be, the aggregate of the amounts referred to in subsection (7)(b) above; and subsections (10) and (11) below shall, as well as applying on the disposal in question, be treated as having applied on any previous part disposal by the transferor.

(10)Where, for the purposes of any disposal of the asset by the transferor, any amount falling within any, or any combination of, paragraphs (a) to (c) of section 38(1) is required by any enactment to be excluded, reduced or written down, the amount or aggregate referred to in subsection (9) above (or so much of it as remains after the application of this subsection and subsection (11) below on a previous part disposal) shall be reduced in proportion to any reduction made in the amount falling within the paragraph, or the combination of paragraphs, in question.

(11)Where the transferor makes a part disposal of the asset at any time, then, for the purposes of that and any subsequent disposal, the amount or aggregate referred to in subsection (9) above (or so much of it as remains after the application of this subsection and subsection (10) above on a previous part disposal by him or after the application of subsection (10) above on the part disposal) shall be apportioned between the property disposed of and the property which remains in the same proportions as the sums falling within section 38(1)(a) and (b).]

Textual Amendments

F143Words in s. 55(5) substituted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 60

F144S. 55(5A) inserted (with effect in accordance with Sch. 40 para. 8 of the amending Act) by Finance Act 2009 (c. 10), Sch. 40 para. 3

F145Word in s. 55(6)(a) omitted (with effect in accordance with art. 7(4) of the amending S.I.) by virtue of The Enactment of Extra-Statutory Concessions Order 2010 (S.I. 2010/157), arts. 1, 7(2)

F146S. 55(6)(aa) inserted (with effect in accordance with art. 7(4) of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2010 (S.I. 2010/157), arts. 1, 7(2)

F147S. 55(7)-(11) inserted (with effect in accordance with s. 93(11) of the amending Act) by Finance Act 1994 (c. 9), s. 93(4) (with Sch. 12)

56 Part disposals and disposals on a no-gain/no-loss basis.U.K.

(1)For the purpose of determining the indexation allowance (if any) on the occasion of a part disposal of an asset, the apportionment under section 42 of the sums which make up the relevant allowable expenditure shall be effected before the application of section 54 and, accordingly, in relation to a part disposal—

(a)references in section 54 to an item of expenditure shall be construed as references to that part of that item which is so apportioned for the purposes of the computation of the unindexed gain F148... on the part disposal; and

(b)no indexation allowance shall be determined by reference to the part of each item of relevant allowable expenditure which is apportioned to the property which remains undisposed of.

(2)[F149On a no gain/no loss disposal by any person (“the transferor”)]

(a)the amount of the consideration shall be calculated for the purposes of this Act on the assumption that, on the disposal, an unindexed gain accrues to the transferor which is equal to the indexation allowance on the disposal, and

(b)the disposal shall accordingly be one on which, after taking account of the indexation allowance, neither a gain nor a loss accrues;

and for the purposes of the application of sections 53 and 54 there shall be disregarded so much of any enactment as provides that, on the subsequent disposal of the asset by the person acquiring the asset on the disposal (“the transferee”), the transferor’s acquisition of the asset is to be treated as the transferee’s acquisition of it.

[F150(3)Where apart from this subsection—

(a)a loss would accrue on the disposal of an asset, and

(b)the sums allowable as a deduction in computing that loss would include an amount attributable to the application of the assumption in subsection (2) above on any no gain/no loss disposal made on or after 30th November 1993,

those sums shall be determined as if that subsection had not applied on any such disposal made on or after that date and the loss shall be reduced accordingly or, if those sums are then equal to or less than the consideration for the disposal, the disposal shall be one on which neither a gain nor a loss accrues.

(4)For the purposes of this section a no gain/no loss disposal is one which, by virtue of any enactment other than section 35(4), 53(1) or this section, is treated as a disposal on which neither a gain nor a loss accrues to the person making the disposal.]

Textual Amendments

F148Words in s. 56(1)(a) repealed (with effect in accordance with s. 93(11) of the amending Act) by Finance Act 1994 (c. 9), Sch. 26 Pt. V(8)

F149Words in s. 56(2) substituted (with effect in accordance with s. 93(11) of the amending Act) by Finance Act 1994 (c. 9), s. 93(5)(a) (with Sch. 12)

F150S. 56(3)(4) added (with effect in accordance with s. 93(11) of the amending Act) by Finance Act 1994 (c. 9), s. 93(5)(b) (with Sch. 12)

57 Receipts etc. which are not treated as disposals but affect relevant allowable expenditure.U.K.

(1)This section applies where, in determining the relevant allowable expenditure in relation to a disposal of an asset, account is required to be taken, as mentioned in section 53(3), of any provision of any enactment which, by reference to a relevant event, reduces the whole or any part of an item of expenditure as mentioned in that subsection.

(2)For the purpose of determining, in a case where this section applies, the indexation allowance (if any) to which the person making the disposal is entitled, no account shall in the first instance be taken of the provision referred to in subsection (1) above in calculating the indexed rise in the item of expenditure to which that provision applies but, from that indexed rise as so calculated, there shall be deducted a sum equal to the indexed rise (determined as for the purposes of the actual disposal) in a notional item of expenditure which—

(a)is equal to the amount of the reduction effected by the provision concerned; and

(b)was incurred on the date of the relevant event referred to in subsection (1) above.

(3)In this section “relevant event” means any event which does not fall to be treated as a disposal for the purposes of this Act.

F151Chapter 5U.K.Computation of gains and losses: relevant high value disposals

Textual Amendments

F151Pt. 2 Ch. 5 omitted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 1 para. 5

F15157AGains and losses on relevant high value disposalsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F152Chapter 6U.K.Computation of gains and losses: non-resident CGT disposals

Textual Amendments

F152Pt. 2 Ch. 6 omitted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 1 para. 6

F15257BGains and losses on non-resident CGT disposalsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F153Chapter 7U.K.Computation of gains and losses: disposals of residential property interests

Textual Amendments

F153Pt. 2 Ch. 7 omitted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 1 para. 7

F15357CGains and losses on disposals of residential property interestsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part IIIU.K. Individuals, partnerships, trusts and collective investment schemes [F154etc]

Textual Amendments

F154Word in Pt. 3 heading inserted (with effect in accordance with Sch. 22 para. 12 of the amending Act) by Finance Act 2009 (c. 10), Sch. 22 para. 9; S.I. 2010/670, art. 2

Chapter IU.K. Miscellaneous provisions

58 [F155Spouses and civil partners].U.K.

(1)[F156If, in any year of assessment, —

(a)an individual is living with his spouse or civil partner, and

(b)one of them disposes of an asset to the other,

both] shall be treated as if the asset was acquired from the one making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal.

(2)This section shall not apply—

(a)if until the disposal the asset formed part of trading stock of a trade carried on by the one making the disposal, or if the asset is acquired as trading stock for the purposes of a trade carried on by the one acquiring the asset, F157... [F158or]

(b)if the disposal is by way of donatio mortis causa, F159...

F159(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

but this section shall have effect notwithstanding the provisions of section 18 or 161, or of any other provisions of this Act fixing the amount of the consideration deemed to be given on a disposal or acquisition.

F160(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F160(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F160(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F157Word in s. 58(2)(a) omitted (1.9.2013) by virtue of Finance Act 2013 (c. 29), Sch. 23 paras. 18(a), 38; S.I. 2013/1755, art. 2

F158Word in s. 58(2)(a) inserted (with effect in accordance with s. 13(6)-(8) of the amending Act) by Finance Act 2017 (c. 10), s. 13(2)(a)(i)

F159S. 58(2)(c) and preceding word omitted (with effect in accordance with s. 13(6)-(8) of the amending Act) by virtue of Finance Act 2017 (c. 10), s. 13(2)(a)(ii)

F160S. 58(3)-(5) omitted (with effect in accordance with s. 13(6)-(8) of the amending Act) by virtue of Finance Act 2017 (c. 10), s. 13(2)(b)

Modifications etc. (not altering text)

59 Partnerships.U.K.

[F161(1)]Where 2 or more persons carry on a trade or business in partnership—

(a)tax in respect of chargeable gains accruing to them on the disposal of any partnership assets shall, in Scotland as well as elsewhere in the United Kingdom, be assessed and charged on them separately, and

(b)any partnership dealings shall be treated as dealings by the partners and not by the firm as such, F162...

F162(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F163(2)Subsection (3) applies if—

(a)a person resident in the United Kingdom (“the resident partner”) is a member of a partnership which resides outside the United Kingdom or which carries on any trade, profession or business the control and management of which is situated outside the United Kingdom, and

(b)by virtue of any arrangements [F164that have effect under section 2(1) of TIOPA 2010] (“the arrangements”) any of the [F165chargeable gains of the partnership] are relieved from capital gains tax [F166or corporation tax] in the United Kingdom.

(3)The arrangements [F167(so far as providing for that relief)] do not affect any liability to capital gains tax [F168or corporation tax] in respect of the resident partner's share of any [F169chargeable gains of the partnership].]

[F170(4)For the purposes of subsections (2) and (3) the members of a partnership include any person entitled to a share of [F171chargeable gains of the partnership].]

Textual Amendments

F161S. 59(1) renumbered (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 431(2) (with Sch. 2)

F162S. 59(c) and preceding word repealed (with effect in accordance with Sch. 29 Pt. VIII(16) of the amending Act) by Finance Act 1995 (c. 4), Sch. 29 Pt. VIII(16)

F163S. 59(2)(3) inserted (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 431(3) (with Sch. 2)

F164Words in s. 59(2)(b) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 43 (with Sch. 9 paras. 1-9, 22)

F165Words in s. 59(2)(b) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 28

F166Words in s. 59(2)(b) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 365(2) (with Sch. 2 Pts. 1, 2)

F167Words in s. 59(3) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 365(3)(a) (with Sch. 2 Pts. 1, 2)

F168Words in s. 59(3) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 365(3)(b) (with Sch. 2 Pts. 1, 2)

F169Words in s. 59(3) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 28

F170S. 59(4) inserted (retrospective to 6.4.2005) by Finance Act 2008 (c. 9), s. 58(2)(4)

F171Words in s. 59(4) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 28

[F17259A Limited liability partnerships.U.K.

(1)Where a limited liability partnership carries on a trade or business with a view to profit—

(a)assets held by the limited liability partnership are treated for the purposes of tax in respect of chargeable gains as held by its members as partners, and

(b)any dealings by the limited liability partnership are treated for those purposes as dealings by its members in partnership (and not by the limited liability partnership as such);

and tax in respect of chargeable gains accruing to the members of the limited liability partnership on the disposal of any of its assets shall be assessed and charged on them separately.

(2)For all purposes, except as otherwise provided, in the enactments relating to tax in respect of chargeable gains—

(a)references to a partnership include a limited liability partnership in relation to which subsection (1) above applies,

(b)references to members of a partnership include members of such a limited liability partnership,

(c)references to a company do not include such a limited liability partnership, and

(d)references to members of a company do not include members of such a limited liability partnership.

(3)Subsection (1) above continues to apply in relation to a limited liability partnership which no longer carries on any trade or business with a view to profit—

(a)if the cessation is only temporary, or

(b)during a period of winding up following a permanent cessation, provided—

(i)the winding up is not for reasons connected in whole or in part with the avoidance of tax, and

(ii)the period of winding up is not unreasonably prolonged,

but subject to subsection (4) below.

(4)Subsection (1) above ceases to apply in relation to a limited liability partnership—

(a)on the appointment of a liquidator or (if earlier) the making of a winding-up order by the court, or

(b)on the occurrence of any event under the law of a country or territory outside the United Kingdom corresponding to an event specified in paragraph (a) above.

(5)Where subsection (1) above ceases to apply in relation to a limited liability partnership with the effect that tax is assessed and charged—

(a)on the limited liability partnership (as a company) in respect of chargeable gains accruing on the disposal of any of its assets, and

(b)on the members in respect of chargeable gains accruing on the disposal of any of their capital interests in the limited liability partnership,

it shall be assessed and charged on the limited liability partnership as if subsection (1) above had never applied in relation to it.

(6)Neither the commencement of the application of subsection (1) above nor the cessation of its application in relation to a limited liability partnership shall be taken as giving rise to the disposal of any assets by it or any of its members.]

Textual Amendments

F172S. 59A inserted (6.4.2001) by Limited Liability Partnerships Act 2000 (c. 12), ss. 10(3), 19(1); S.I. 2000/3316, art. 2; s. 59A substituted (retrospectively) (6.4.2001) by Finance Act 2001 (c. 9), s. 75(2)(6) (with Sch. 3)

[F17359BAlternative investment fund managers (1)U.K.

(1)Subsection (2) applies if—

(a)under section 863I of ITTOIA 2005, a partner (“P”) in a partnership allocates to the partnership an amount of profit (“the allocated profit”) representing variable remuneration which, if it vests in P, will vest in the form of instruments,

(b)there is a disposal to P of instruments which are partnership assets of the partnership for the purposes of section 59, and

(c)by virtue of that disposal the variable remuneration vests in P.

(2)Both the persons making the disposal and P are to be treated as if the instruments were acquired by P from those persons for a consideration of an amount equal to the allocated profit net of the income tax for which the partnership is liable by virtue of section 863I of ITTOIA 2005 in respect of the allocated profit.

(3)Terms used in this section which are also used in section 863I or 863J of ITTOIA 2005 have the same meaning as in that section.

Textual Amendments

F173Ss. 59B, 59C inserted (with effect in accordance with Sch. 17 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 17 para. 17

59CAlternative investment managers (2)U.K.

(1)Subsection (2) applies if—

(a)under section 863I of ITTOIA 2005, a partner (“P”) in a partnership allocates to the partnership an amount of profit (“the allocated profit”) representing variable remuneration which, if it vests in P, will vest in the form of instruments,

(b)there is a disposal to P of instruments by a company which is a partner in the partnership,

(c)by virtue of that disposal the variable remuneration vests in P, and

(d)the company would, as a partner in the partnership, have been charged to tax on the allocated profit but for adjustments made in the case of the company under section 1264A(2) of CTA 2009 or section 850C(5) of ITTOIA 2005.

(2)Both the company and P are to be treated as if the instruments were acquired by P from the company for a consideration of an amount equal to the allocated profit net of the income tax for which the partnership is liable by virtue of section 863I of ITTOIA 2005 in respect of the allocated profit.

(3)Terms used in this section which are also used in section 863I or 863J of ITTOIA 2005 have the same meaning as in that section.]

Textual Amendments

F173Ss. 59B, 59C inserted (with effect in accordance with Sch. 17 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 17 para. 17

60 Nominees and bare trustees.U.K.

(1)In relation to [F174property] held by a person as nominee for another person, or as trustee for another person absolutely entitled as against the trustee, or for any person who would be so entitled but for being an infant or other person under disability (or for 2 or more persons who are or would be jointly so entitled), this Act shall apply as if the property were vested in, and the acts of the nominee or trustee in relation to the [F174property] were the acts of, the person or persons for whom he is the nominee or trustee (acquisitions from or disposals to him by that person or persons being disregarded accordingly).

(2)It is hereby declared that references in this Act to any [F175property] held by a person as trustee for another person absolutely entitled as against the trustee are references to a case where that other person has the exclusive right, subject only to satisfying any outstanding charge, lien or other right of the trustees to resort to the [F175property] for payment of duty, taxes, costs or other outgoings, to direct how that [F175property] shall be dealt with.

Textual Amendments

F174Word in s. 60(1) substituted (with effect in accordance with Sch. 12 para. 10(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 10(1)

F175Word in s. 60(2) substituted (with effect in accordance with Sch. 12 para. 10(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 10(2)

Modifications etc. (not altering text)

C137S. 60 applied (with application in accordance with s. 58(4) of the amending Act) by Finance Act 2013 (c. 29), s. 59(8)

C138S. 60(1) applied (27.7.1993) by 1993 c. 37, s. 12, Sch. 2 Pt. I para. 21(2)(d)

61 Funds in court.U.K.

(1)For the purposes of section 60, funds in court held by the Accountant General shall be regarded as held by him as nominee for the persons entitled to or interested in the funds, or as the case may be for their trustees.

(2)Where funds in court standing to an account are invested or, after investment, are realised, the method by which the Accountant General effects the investment or the realisation of investments shall not affect the question whether there is for the purposes of this Act an acquisition, or as the case may be a disposal, of an asset representing funds in court standing to the account, and in particular there shall for those purposes be an acquisition or disposal of shares in a court investment fund notwithstanding that the investment in such shares of funds in court standing to an account, or the realisation of funds which have been so invested, is effected by setting off, in the Accountant General’s accounts, investment in one account against realisation of investments in another.

(3)In this section “funds in court” means—

(a)money in the [F176Senior Courts], money in [F177the county court][F178, money in the family court] and statutory deposits described in section 40 of the M3Administration of Justice Act 1982, and

(b)money in the [F179Court of Judicature] and money in a county court in Northern Ireland,

and investments representing such money; and references in this section to the Accountant General are references to the Accountant General of the [F180Senior Courts] and, in relation to money within paragraph (b) above and investments representing such money, include references to the Accountant General of the [F179Court of Judicature] or any other person by whom such funds are held.

Textual Amendments

F177Words in s. 61(3)(a) substituted (22.4.2014) by Crime and Courts Act 2013 (c. 22), s. 61(3), Sch. 9 para. 131; S.I. 2014/954, art. 2(c) (with art. 3) (with transitional provisions and savings in S.I. 2014/956, arts. 3-11)

Marginal Citations

62 Death: general provisions.U.K.

(1)For the purposes of this Act the assets of which a deceased person was competent to dispose—

(a)shall be deemed to be acquired on his death by the personal representatives or other person on whom they devolve for a consideration equal to their market value at the date of the death, but

(b)shall not be deemed to be disposed of by him on his death (whether or not they were the subject of a testamentary disposition).

(2)Allowable losses sustained by an individual in the year of assessment in which he dies may, so far as they cannot be deducted from chargeable gains accruing in that year, be deducted from chargeable gains accruing to the deceased in the 3 years of assessment preceding the year of assessment in which the death occurs, taking chargeable gains accruing in a later year before those accruing in an earlier year.

[F181(2A)Amounts deductible from chargeable gains for any year in accordance with subsection (2) above shall not be so deductible from any such gains so far as they [F182are—

(a)gains that are treated as accruing by virtue of section 87[F183, 87K, 87L] or 89(2) (read, where appropriate, with [F184section 1M]), or

[F185(b)relevant non-resident gains (see subsection (11)).]]

[F186(2AA)Where [F187relevant non-resident losses (see subsection (11))] are sustained by an individual in the year of assessment in which the individual dies, the losses may, so far as they cannot be deducted from chargeable gains accruing to the individual in that year, be deducted from any gains such as are mentioned in subsection (2A)(b) that accrued to the deceased in the 3 years of assessment preceding the year of assessment in which the death occurs, taking chargeable gains accruing in a later year before those accruing in an earlier year.]

F188(2B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]

(3)In relation to property forming part of the estate of a deceased person the personal representatives shall for the purposes of this Act be treated as being a single and continuing body of persons (distinct from the persons who may from time to time be the personal representatives), and that body shall be treated as having the deceased’s residence F189... and domicile at the date of death.

(4)On a person acquiring any asset as legatee (as defined in section 64)—

(a)no chargeable gain shall accrue to the personal representatives, and

(b)the legatee shall be treated as if the personal representatives’ acquisition of the asset had been his acquisition of it.

[F190(4A)The Treasury may by regulations make provision having effect in place of subsection (4)(b) above in a case where there has been a time when the personal representatives—

(a)held the asset acquired by the legatee, and

(b)would, if they had disposed of the asset at that time—

(i)by way of a bargain at arm's length, and

(ii)otherwise than to a legatee,

have been entitled as a result of regulations under section 151 (investments under plans) to relief from capital gains tax in respect of any chargeable gain accruing on the disposal.

(4B)Provision made by regulations under subsection (4A) above may (in particular) treat a person who acquires an asset as legatee as doing so at a time or for a consideration, or at a time and for a consideration, ascertained as specified by the regulations.]

(5)Notwithstanding section 17(1) no chargeable gain shall accrue to any person on his making a disposal by way of donatio mortis causa.

(6)Subject to subsections (7) and (8) below, where within the period of 2 years after a person’s death any of the dispositions (whether effected by will, under the law relating to intestacy or otherwise) of the property of which he was competent to dispose are varied, or the benefit conferred by any of those dispositions is disclaimed, by an instrument in writing made by the persons or any of the persons who benefit or would benefit under the dispositions—

(a)the variation or disclaimer shall not constitute a disposal for the purposes of this Act, and

(b)this section shall apply as if the variation had been effected by the deceased or, as the case may be, the disclaimed benefit had never been conferred.

(7)Subsection (6) above does not apply to a variation [F191unless the instrument contains a statement by the persons making the instrument to the effect that they intend the subsection to apply to the variation.]

(8)Subsection (6) above does not apply to a variation or disclaimer made for any consideration in money or money’s worth other than consideration consisting of the making of a variation or disclaimer in respect of another of the dispositions.

(9)Subsection (6) above applies whether or not the administration of the estate is complete or the property has been distributed in accordance with the original dispositions.

(10)In this section references to assets of which a deceased person was competent to dispose are references to assets of the deceased which (otherwise than in right of a power of appointment or of the testamentary power conferred by statute to dispose of entailed interests) he could, if of full age and capacity, have disposed of by his will, assuming that all the assets were situated in England and, if he was not domiciled in the United Kingdom, that he was domiciled in England, and include references to his severable share in any assets to which, immediately before his death, he was beneficially entitled as a joint tenant.

[F192(11)In this section—

Textual Amendments

F181S. 62(2A)(2B) inserted (with effect in accordance with s. 121(4) of the amending Act) by Finance Act 1998 (c. 36), Sch. 21 para. 5

F182Words in s. 62(2A) substituted (with effect in accordance with Sch. 7 para. 60 of the amending Act) by Finance Act 2015 (c. 11), Sch. 7 para. 17(2)

F183Words in s. 62(2A)(a) inserted (15.3.2018) by Finance Act 2018 (c. 3), Sch. 10 para. 1(2)

F184Words in s. 62(2A)(a) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 29(2)(a)

F185S. 62(2A)(b) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 29(2)(b) (with Sch. 1 para. 29(5)(6))

F186S. 62(2AA) inserted (with effect in accordance with Sch. 7 para. 60 of the amending Act) by Finance Act 2015 (c. 11), Sch. 7 para. 17(3)

F187Words in s. 62(2AA) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 29(3)

F188S. 62(2B) omitted (with effect in accordance with Sch. 2 para. 56(3) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 2 para. 29(3)

F189Words in s. 62(3) omitted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 79

F190S. 62(4A)(4B) inserted (15.9.2016) by Finance Act 2016 (c. 24), s. 27(3)

F191Words in s. 62(7) substituted (with application in accordance with s. 52(2) of the amending Act) by Finance Act 2002 (c. 23), s. 52(1)

F192S. 62(11) inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 29(4)

Modifications etc. (not altering text)

C139S. 62 applied (with effect in accordance with art. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 34

C140S. 62 applied by The Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964), reg. 85W(2) (as inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by S.I. 2010/294, regs. 1(1), 21)

63 Death: application of law in Scotland.U.K.

(1)The provisions of this Act, so far as relating to the consequences of the death of F193... a proper liferenter of any property, shall have effect subject to the provisions of this section.

(2)F194... on the death of any such F195... liferenter F196... the person (if any) who, on the death of the liferenter, becomes entitled to possession of the property as fiar shall be deemed to have acquired all the assets forming part of the property at the date of the deceased’s death for a consideration equal to their market value at that date.

Textual Amendments

F193Words in s. 63(1) repealed (with effect in accordance with Sch. 12 para. 11(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 11(1)(a), Sch. 26 Pt. 3(15)

F194Words in s. 63(2) repealed (with effect in accordance with Sch. 12 para. 11(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 11(1)(b)(i), Sch. 26 Pt. 3(15)

F195Words in s. 63(2) repealed (with effect in accordance with Sch. 12 para. 11(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 11(1)(b)(ii), Sch. 26 Pt. 3(15)

F196Words in s. 63(2) repealed (with effect in accordance with Sch. 12 para. 11(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 11(1)(b)(iii), Sch. 26 Pt. 3(15)

[F19763ADeath: application of law in Northern IrelandU.K.

(1)The provisions of this Act, so far as relating to the consequences of the death of a person to whom property in Northern Ireland stands limited for life (“the deceased”), shall have effect subject to the provisions of this section.

(2)A person who acquires property in fee simple absolute or fee tail in possession as a consequence of the deceased's death shall be deemed to have acquired all the assets forming part of the property at the date of the deceased's death for a consideration equal to their market value at that date.]

Textual Amendments

F197S. 63A inserted (with effect in accordance with Sch. 12 para. 11(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 11(2)

64 Expenses in administration of estates and trusts.U.K.

(1)In the case of a gain accruing to a person on the disposal of, or of a right or interest in or over, [F198an asset held by another person as trustee, or as a personal representative of a deceased person, to which he became absolutely entitled as legatee or as against the trustee]

(a)any expenditure within section 38(2) incurred by him in relation to the transfer of the asset to him by the [F199personal representative or trustee], and

(b)any such expenditure incurred in relation to the transfer of the asset by the [F200personal representative or trustee],

shall be allowable as a deduction in the computation of the gain accruing to that person on the disposal.

(2)In this Act, unless the context otherwise requires, “legatee” includes any person taking under a testamentary disposition or on an intestacy or partial intestacy, whether he takes beneficially or as trustee, and a person taking under a donatio mortis causa shall be treated (except for the purposes of section 62) as a legatee and his acquisition as made at the time of the donor’s death.

(3)For the purposes of the definition of “legatee” above, and of any reference in this Act to a person acquiring an asset “as legatee”, property taken under a testamentary disposition or on an intestacy or partial intestacy includes any asset appropriated by the personal representatives in or towards satisfaction of a pecuniary legacy or any other interest or share in the property devolving under the disposition or intestacy.

Textual Amendments

F198Words in s. 64(1) substituted (with effect in accordance with Sch. 12 para. 12(2) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 12(1)(a)

F199Words in s. 64(1)(a) substituted (with effect in accordance with Sch. 12 para. 12(2) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 12(1)(b)

F200Words in s. 64(1)(b) substituted (with effect in accordance with Sch. 12 para. 12(2) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 12(1)(b)

65 Liability for tax of trustees or personal representatives.U.K.

[F201(1)Subject to subsection (3) below, capital gains tax chargeable in respect of chargeable gains accruing to the trustees of a settlement or capital gains tax due from the personal representatives of a deceased person may be assessed and charged on and in the name of any one or more of the relevant trustees or the relevant personal representatives.]

(2)Subject to section 60 and any other express provision to the contrary, chargeable gains accruing to the trustees of a settlement or to the personal representatives of a deceased person, and capital gains tax chargeable on or in the name of such trustees or personal representatives, shall not be regarded for the purposes of this Act as accruing to, or chargeable on, any other person, nor shall any trustee or personal representative be regarded for the purposes of this Act as an individual.

[F202(3)Where section 80 applies as regards the trustees of a settlement (“the migrating trustees”), nothing in subsection (1) above shall enable any person—

(a)who ceased to be a trustee of the settlement before the end of the relevant period, and

(b)who shows that, when he ceased to be a trustee of the settlement, there was no proposal that the trustees might [F203cease to be resident] in the United Kingdom,

to be assessed and charged to any capital gains tax which is payable by the migrating trustees by virtue of section 80(2).

(4)In this section—

Textual Amendments

F201S. 65(1) substituted (with effect in accordance with s. 103(7) of the amending Act) by Finance Act 1995 (c. 4), s. 114(1)

F202S. 65(3)(4) inserted (with effect in accordance with s. 103(7) of the amending Act) by Finance Act 1995 (c. 4), s. 114(2)

F203Words in s. 65(3)(b) substituted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by Finance Act 2013 (c. 29), Sch. 46 para. 80

66 Insolvents’ assets.U.K.

(1)In relation to assets held by a person as trustee or assignee in bankruptcy or under a deed of arrangement this Act shall apply as if the assets were vested in, and the acts of the trustee or assignee in relation to the assets were the acts of, the bankrupt or debtor (acquisitions from or disposals to him by the bankrupt or debtor being disregarded accordingly), and tax in respect of any chargeable gains which accrue to any such trustee or assignee shall be assessable on and recoverable from him.

(2)Assets held by a trustee or assignee in bankruptcy or under a deed of arrangement at the death of the bankrupt or debtor shall for the purposes of this Act be regarded as held by a personal representative of the deceased and—

(a)subsection (1) above shall not apply after the death, and

(b)section 62(1) shall apply as if any assets held by a trustee or assignee in bankruptcy or under a deed of arrangement at the death of the bankrupt or debtor were assets of which the deceased was competent to dispose and which then devolved on the trustee or assignee as if he were a personal representative.

(3)Assets vesting in a trustee in bankruptcy after the death of the bankrupt or debtor shall for the purposes of this Act be regarded as held by a personal representative of the deceased, and subsection (1) above shall not apply.

(4)The definition of “settled property” in section 68 shall not include any property as being property held by a trustee or assignee in bankruptcy or under a deed of arrangement.

(5)In this section—

67 Provisions applicable where section 79 of the Finance Act 1980 has applied.U.K.

(1)In this section “a claim” means a claim under section 79 of the Finance Act 1980 (“section 79”) and “relief” means relief under that section (which provided general relief for gifts).

(2)Where a disposal in respect of which a claim is or has been made is or proves to be a chargeable transfer for inheritance tax purposes, there shall be allowed as a deduction in computing (for capital gains tax purposes) the chargeable gain accruing to the transferee on the disposal of the asset in question an amount equal to whichever is the lesser of—

(a)the inheritance tax attributable to the value of the asset; and

(b)the amount of the chargeable gain as computed apart from this subsection;

and in the case of a disposal which, being a potentially exempt transfer, proves to be a chargeable transfer, all necessary adjustments shall be made, whether by the discharge or repayment of capital gains tax or otherwise.

(3)Where an amount of inheritance tax—

(a)falls to be redetermined in consequence of the transferor’s death within 7 years of making the chargeable transfer in question; or

(b)is otherwise varied,

after it has been taken into account under subsection (2) above (or under section 79(5)), all necessary adjustments shall be made, whether by the making of an assessment to capital gains tax or by the discharge or repayment of such tax.

(4)Where—

(a)a claim for relief has been made in respect of the disposal of an asset to a trustee, and

(b)the trustee is deemed to have disposed of the asset, or part of it, by virtue of section 71(1) or 72(1)(a),

sections 72(1)(b) and 73(1)(a) shall not apply to the disposal of the asset, or part by the trustee, but any chargeable gain accruing to the trustee on the disposal shall be restricted to the amount of the held-over gain (or a corresponding part of it) on the disposal of the asset to him.

(5)Subsection (4) above shall not have effect in a case within section 73(2) but in such a case the reduction provided for by section 73(2) shall be diminished by an amount equal to the proportion there mentioned of the held-over gain.

(6)Section 168 shall apply where relief has been given—

(a)with the substitution for subsection (1) of the following—

(1)If—

(a)relief has been given under section 79 of the Finance Act 1980 in respect of a disposal made after 5th April 1981 to an individual (“the relevant disposal”); and

(b)at a time when he has not disposed of the asset in question, the transferee [F207ceases to be resident] in the United Kingdom,

then, subject to the following provisions of this section, a chargeable gain shall be deemed to have accrued to the transferee immediately before that time, and its amount shall be equal to the held-over gain (within the meaning of section 67) on the relevant disposal.; and

(b)with the substitution in subsections (2), (6) and (10) for the references to section 165(4)(b) of references to section 79(1)(b).

(7)In this section “held-over gain”, in relation to a disposal, means the chargeable gain which would have accrued on that disposal apart from section 79, reduced where applicable in accordance with subsection (3) of that section, and references to inheritance tax include references to capital transfer tax.

Textual Amendments

F207Words in s. 67(6)(a) substituted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by Finance Act 2013 (c. 29), Sch. 46 para. 81

Chapter IIU.K. Settlements

General provisionsU.K.

68 Meaning of “settled property".U.K.

In this Act, unless the context otherwise requires, [F208settled property” means any property held in trust other than property to which section 60 applies (and references, however expressed, to property comprised in a settlement are references to settled property)].

Textual Amendments

F208Words in s. 68 substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), Sch. 12 para. 1(1)(3)

[F20968AMeaning of “settlor”U.K.

(1)In this Act, unless the context otherwise requires—

(a)settlor” in relation to a settlement means the person, or any of the persons, who has made, or is treated for the purposes of this Act as having made, the settlement, and

(b)a person is a settlor of property which—

(i)is settled property by reason of his having made the settlement (or by reason of an event which causes him to be treated under this Act as having made the settlement), or

(ii)derives from property to which sub-paragraph (i) applies.

(2)A person is treated for the purposes of this Act as having made a settlement if—

(a)he has made or entered into the settlement, directly or indirectly, or

(b)the settled property, or property from which the settled property is derived, is or includes property of which he was competent to dispose immediately before his death, and the settlement arose on his death, whether by will, on his intestacy, or otherwise.

(3)A person is, in particular, treated for the purposes of this Act as having made a settlement if—

(a)he has provided property directly or indirectly for the purposes of the settlement, or

(b)he has undertaken to provide property directly or indirectly for the purposes of the settlement.

(4)Where one person (A) makes or enters into a settlement in accordance with reciprocal arrangements with another person (B), for the purposes of this Act—

(a)B shall be treated as having made the settlement, and

(b)A shall not be treated as having made the settlement by reason only of the reciprocal arrangements.

(5)In subsection (2)(b) “property of which he was competent to dispose immediately before his death” shall be construed in accordance with section 62(10) (reading each reference to “assets” as a reference to “property”).

(6)A person who has been a settlor in relation to a settlement shall be treated for the purposes of this Act as having ceased to be a settlor in relation to the settlement if—

(a)no property of which he is a settlor is comprised in the settlement,

(b)he has not undertaken to provide property directly or indirectly for the purposes of the settlement in the future, and

(c)he has not made reciprocal arrangements with another person for that other person to enter into the settlement in the future.

(7)For the purpose of this section and sections 68B and 68C property is derived from other property—

(a)if it derives (directly or indirectly and wholly or partly) from that property or any part of it, and

(b)in particular, if it derives (directly or indirectly and wholly or partly) from income from that property or any part of it.

(8)In this section “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.

Textual Amendments

F209Ss. 68A, 68B inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), Sch. 12 para. 1(2)(4)

68BTransfer between settlements: identification of settlorU.K.

(1)This section applies in relation to a transfer of property from the trustees of one settlement (“Settlement 1”) to the trustees of another (“Settlement 2”) otherwise than—

(a)for full consideration, or

(b)by way of a bargain made at arm's length.

(2)In this section “transfer of property” means—

(a)a disposal of property by the trustees of Settlement 1, and

(b)the acquisition by the trustees of Settlement 2 of—

(i)property disposed of by the trustees of Settlement 1, or

(ii)property created by the disposal;

and a reference to transferred property is a reference to property acquired by the trustees of Settlement 2 on the disposal.

(3)For the purposes of this Act, except where the context otherwise requires—

(a)the settlor (or each settlor) of the property disposed of by the trustees of Settlement 1 shall be treated from the time of the disposal as having made Settlement 2, and

(b)if there is more than one settlor of the property disposed of by the trustees of Settlement 1, each settlor shall be treated in relation to Settlement 2 as the settlor of a proportionate part of the transferred property.

(4)For the purposes of this Act, except where the context otherwise requires, if and to the extent that the property disposed of by the trustees of Settlement 1 was provided for the purposes of Settlement 1, or is derived from property provided for the purposes of Settlement 1, the transferred property shall be treated from the time of the disposal as having been provided for the purposes of Settlement 2.

(5)If transferred property is treated by virtue of subsection (4) as having been provided for the purposes of Settlement 2 —

(a)the person who provided the property disposed of by the trustees of Settlement 1, or property from which it was derived, for the purposes of Settlement 1 shall be treated as having provided the transferred property, and

(b)if more than one person provided the property disposed of by the trustees of Settlement 1, or property from which it was derived, for the purposes of Settlement 1, each of them shall be treated as having provided a proportionate part of the transferred property.

(6)But subsections (3) and (4) do not apply in relation to a transfer of property—

(a)which occurs by reason only of the assignment or assignation by a beneficiary under Settlement 1 of an interest in that settlement to the trustees of Settlement 2,

(b)which occurs by reason only of the exercise of a general power of appointment, or

(c)to which section 68C(6) applies.

(7)In determining whether this section applies in relation to a transfer of property between settlements, section 18(2) shall be disregarded.]

Textual Amendments

F209Ss. 68A, 68B inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), Sch. 12 para. 1(2)(4)

[F21068CVariation of will or intestacy, etc: identification of settlorU.K.

(1)This section applies where—

(a)a disposition of property following a person's death is varied, and

(b)section 62(6) applies in respect of the variation.

(2)Where property becomes settled property in consequence of the variation (and would not, but for the variation, have become settled property), a person mentioned in subsection (3) shall be treated for the purposes of this Act, except where the context otherwise requires—

(a)as having made the settlement, and

(b)as having provided the property for the purposes of the settlement.

(3)Those persons are—

(a)a person who immediately before the variation was entitled to the property, or to property from which it derives, absolutely as legatee,

(b)a person who would have become entitled to the property, or to property from which it derives, absolutely as legatee but for the variation,

(c)a person who immediately before the variation would have been entitled to the property, or to property from which it derives, absolutely as legatee but for being an infant or other person under a disability, and

(d)a person who would, but for the variation, have become entitled to the property, or to property from which it derives, absolutely as legatee if he had not been an infant or other person under a disability.

(4)In subsection (3) references to a person being entitled to property absolutely as legatee shall be construed in accordance with section 64(3) (reading the references to “an asset” and “any asset” as references to “property”).

(5)Where—

(a)property would have become comprised in a settlement—

(i)which arose on the deceased person's death (whether in accordance with his will, on his intestacy or otherwise), or

(ii)which was already in existence on the deceased person's death (whether or not the deceased person was a settlor in relation to that settlement), but

(b)in consequence of the variation the property, or property derived from it, becomes comprised in another settlement,

the deceased person shall be treated for the purposes of this Act, except where the context otherwise requires, as having made the other settlement.

(6)Where—

(a)immediately before the variation property is comprised in a settlement and is property of which the deceased person is a settlor, and

(b)immediately after the variation the property, or property derived from it, becomes comprised in another settlement,

the deceased person shall be treated for the purposes of this Act, except where the context otherwise requires, as having made the other settlement.

(7)If a person is treated as having made a settlement under subsection (5) or (6), for the purposes of this Act he shall be treated as having made the settlement immediately before his death.

(8)But subsection (7) does not apply in relation to a settlement which arose on the person's death.]

Textual Amendments

F210S. 68C inserted (with effect in accordance with Sch. 12 para. 1(5) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 1(2)

69 Trustees of settlements.U.K.

[F211(1)For the purposes of this Act the trustees of a settlement shall, unless the context otherwise requires, together be treated as if they were a single person (distinct from the persons who are trustees of the settlement from time to time).

(2)The deemed person referred to in subsection (1) shall be treated for the purposes of this Act as resident F212... in the United Kingdom at any time when a condition in subsection (2A) or (2B) is satisfied.

(2A)Condition 1 is that all the trustees are resident in the United Kingdom.

(2B)Condition 2 is that—

(a)at least one trustee is resident in the United Kingdom,

(b)at least one is not resident in the United Kingdom, and

(c)a settlor in relation to the settlement was resident F213... or domiciled in the United Kingdom at a time which is a relevant time in relation to him.

(2C)In subsection (2B)(c) “relevant time” in relation to a settlor—

(a)means, where the settlement arose on the settlor's death (whether by will, intestacy or otherwise), the time immediately before his death, and

(b)in any other case, means a time when the settlor made the settlement (or was treated for the purposes of this Act as making the settlement);

and, in the case of a transfer of property from Settlement 1 to Settlement 2 in relation to which section 68B applies, “relevant time” in relation to a settlor of the transferred property in respect of Settlement 2 includes any time which, immediately before the time of the disposal by the trustees of Settlement 1, was a relevant time in relation to that settlor in respect of Settlement 1.

(2D)A trustee who is not resident in the United Kingdom shall be treated for the purposes of subsections (2A) and (2B) as if he were resident in the United Kingdom at any time when he acts as trustee in the course of a business which he carries on in the United Kingdom through a branch, agency or permanent establishment there.

[F214(2DA)A trustee who is resident in the United Kingdom for a tax year is to be treated for the purposes of subsections (2A) and (2B) as if he or she were not resident in the United Kingdom for that year if—

(a)the trustee is an individual,

(b)the individual becomes or ceases to be a trustee of the settlement during the tax year,

(c)that year is a split year as respects the individual, and

(d)in that year, the only period when the individual is a trustee of the settlement falls wholly within the overseas part of the year.

(2DB)Subsection (2DA) is subject to subsection (2D) and, accordingly, an individual who is treated under subsection (2DA) as not resident is, in spite of that, to be regarded as resident whenever the individual acts as mentioned in subsection (2D).]

(2E)If the deemed person referred to in subsection (1) is not treated for the purposes of this Act as resident [F215in the United Kingdom, then for the purposes of this Act it is treated as being not resident in the United Kingdom].]

[F216(2F)Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of subsection (2B)(c).]

(3)For the purposes of this section, and of sections 71(1) and 72(1), where part of the property comprised in a settlement is vested in one trustee or set of trustees and part in another (and in particular where settled land within the meaning of the M4Settled Land Act 1925 is vested in the tenant for life and investments representing capital money are vested in the trustees of the settlement), they shall be treated as together constituting and, in so far as they act separately, as acting on behalf of a single body of trustees.

(4)If tax assessed on the trustees, or any one trustee, of a settlement in respect of a chargeable gain accruing to the trustees is not paid within 6 months from the date when it becomes payable by the trustees or trustee, and before or after the expiration of that period of 6 months the asset in respect of which the chargeable gain accrued, or any part of the proceeds of sale of that asset, is transferred by the trustees to a person who as against the trustees is absolutely entitled to it, that person may at any time within 2 years from the time when the tax became payable be assessed and charged (in the name of the trustees) to an amount of capital gains tax not exceeding tax chargeable on an amount equal to the amount of the chargeable gain and, where part only of the asset or of the proceeds was transferred, not exceeding a proportionate part of that amount.

Textual Amendments

F211S. 69(1)-(2E) substituted for s. 69(1)(2) (with effect in accordance with Sch. 12 para. 2(2) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 2(1)

F212Words in s. 69(2) omitted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 82(2)

F213Words in s. 69(2B)(c) omitted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 82(3)

F214S. 69(2DA)(2DB) inserted (with effect in accordance with Sch. 45 para. 153(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 45 para. 102

F215Words in s. 69(2E) substituted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by Finance Act 2013 (c. 29), Sch. 46 para. 82(4)

F216S. 69(2F) inserted (with effect in accordance with Sch. 8 para. 6(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 8 para. 6(1)

Marginal Citations

[F21769ASub-fund settlementsU.K.

Schedule 4ZA (which makes provision about sub-fund settlements) shall have effect.]

Textual Amendments

F217S. 69A inserted (with effect in accordance with Sch. 12 para. 6(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 6(1)

70 Transfers into settlement.U.K.

A transfer into settlement, whether revocable or irrevocable, is a disposal of the entire property thereby becoming settled property notwithstanding that the transferor has some interest as a beneficiary under the settlement and notwithstanding that he is a trustee, or the sole trustee, of the settlement.

71 Person becoming absolutely entitled to settled property.U.K.

(1)On the occasion when a person becomes absolutely entitled to any settled property as against the trustee all the assets forming part of the settled property to which he becomes so entitled shall be deemed to have been disposed of by the trustee, and immediately reacquired by him in his capacity as a trustee within section 60(1), for a consideration equal to their market value.

[F218(2)Where, in any case in which a person (“the beneficiary”) becomes absolutely entitled to any settled property as against the trustee, an allowable loss would (apart from this subsection) have accrued to the trustee on the deemed disposal under subsection (1) above of an asset comprised in that property—

(a)that loss shall be treated, to the extent only that it cannot be deducted from pre-entitlement gains of the trustee, as an allowable loss accruing to the beneficiary (instead of to the trustee); but

(b)any allowable loss treated as accruing to the beneficiary under this subsection shall be deductible under this Act from chargeable gains accruing to the beneficiary to the extent only that it can be deducted from gains accruing to the beneficiary on the disposal by him of—

(i)the asset on the deemed disposal of which the loss accrued; or

(ii)where that asset is an estate, interest or right in or over land, that asset or any asset deriving from that asset.

(2A)In subsection (2) above “pre-entitlement gain”, in relation to an allowable loss accruing to a trustee on the deemed disposal of any asset comprised in any settled property, means a chargeable gain accruing to that trustee on—

(a)a disposal which, on the occasion on which the beneficiary becomes absolutely entitled as against the trustee to that property, is deemed under subsection (1) above to have taken place; or

(b)any other disposal taking place before that occasion but in the same year of assessment.

(2B)For the purposes of subsection (2)(b)(ii) above an asset (“the relevant asset”) derives from another if, in a case where—

(a)assets have merged,

(b)an asset has divided or otherwise changed its nature, or

(c)different rights or interests in or over any asset have been created or extinguished at different times,

the value of the relevant asset is wholly or partly derived (through one or more successive events falling within paragraphs (a) to (c) above but not otherwise) from the other asset.

(2C)The rules set out in subsection (2D) below shall apply (notwithstanding any other rules contained in this Act or in section 113(2) of the Finance Act 1995 (order of deduction))—

(a)for determining for the purposes of this section whether an allowable loss accruing to the trustee, or treated as accruing to the beneficiary, can be deducted from particular chargeable gains for any year of assessment; and

(b)for the making of deductions of allowable losses from chargeable gains in cases where it has been determined that such an allowable loss can be deducted from particular chargeable gains.

(2D)Those rules are as follows—

(a)allowable losses accruing to the trustee on a deemed disposal under subsection (1) above shall be deducted before any deduction is made in respect of any other allowable losses accruing to the trustee in that year;

(b)allowable losses treated as accruing to the beneficiary under this section, so far as they cannot be deducted in a year of assessment as mentioned in subsection (2)(b) above, may be carried forward from year to year until they can be so deducted; and

(c)allowable losses treated as accruing to the beneficiary for any year of assessment under this section, and allowable losses carried forward to any year of assessment under paragraph (b) above—

(i)shall be deducted before any deduction is made in respect of any allowable losses accruing to the beneficiary in that year otherwise than by virtue of this section; and

(ii)in the case of losses carried forward to any year, shall be deductible as if they were losses actually accruing in that year.]

(3)References in this section to the case where a person becomes absolutely entitled to settled property as against the trustee shall be taken to include references to the case where a person would become so entitled but for being an infant or other person under disability.

Textual Amendments

F218S. 71(2)-(2D) substituted for s. 71(2) (with application in accordance with s. 75(2) of the amending Act) by Finance Act 1999 (c. 16), s. 75(1)

Modifications etc. (not altering text)

C141S. 71 excluded (27.7.1993) by 1993 c. 37, s. 12, Sch. 2 Pt. I para. 21(2)(d)

72 Termination of life interest on death of person entitled.U.K.

(1)On the termination, on the death of the person entitled to it, of [F219an] interest in possession in all or any part of settled property—

(a)the whole or a corresponding part of each of the assets forming part of the settled property and not ceasing at that time to be settled property shall be deemed for the purposes of this Act at that time to be disposed of and immediately reacquired by the trustee for a consideration equal to the whole or a corresponding part of the market value of the asset; but

(b)no chargeable gain shall accrue on that disposal.

For the purposes of this subsection [F219an] interest which is a right to part of the income of settled property shall be treated as [F219an] interest in a corresponding part of the settled property.

[F220(1A)Where the interest in possession mentioned in subsection (1) above is one to which the person becomes entitled on or after 22nd March 2006, the first sentence of that subsection applies in relation to that interest only if—

(a)immediately before the person's death, the interest falls within subsection (1B) below, or

(b)the person dies under the age of 18 years and, immediately before the person's death, section 71D of the Inheritance Tax Act 1984 (age 18-to-25 trusts) applies to the property in which the interest subsists.

(1B)An interest falls within this subsection if—

(a)the interest is—

(i)an immediate post-death interest, within the meaning given by section 49A of the Inheritance Tax Act 1984,

(ii)a transitional serial interest, within the meaning given by section 49B of that Act, or

(iii)a disabled person's interest[F221, within the meaning given by section 89B] of that Act, or

(b)section 71A of that Act (trusts for bereaved minors) applies to the property in which the interest subsists.

(1C)Subsection (1A) above does not have effect in relation to the operation of subsection (1) above as applied by subsection (2) below (but see subsection (2A) below).]

(2)Subsection (1) above shall apply where the person entitled to [F222an] interest in possession in all or any part of settled property dies (although the interest does not then terminate) as it applies on the termination of such [F222an] interest.

[F223(2A)Where the interest in possession mentioned in subsection (2) above is one to which the person becomes entitled on or after 22nd March 2006—

(a)subsection (2) above, and

(b)the first sentence of subsection (1) above as applied by subsection (2) above,

apply in relation to that interest only if, immediately before the person's death, the interest falls within subsection (1B)(a) above.]

[F224(3)This section shall apply on the death of the person entitled to any annuity payable out of, or charged on, settled property or the income of settled property as it applies on the death of a person whose interest in possession in the whole or any part of settled property terminates on his death.

(4)Where, in the case of any entitlement to an annuity created by a settlement some of the settled property is appropriated by the trustees as a fund out of which the annuity is payable, and there is no right of recourse to, or to the income of, settled property not so appropriated, then without prejudice to subsection (5) below, the settled property so appropriated shall, while the annuity is payable, and on the occasion of the death of the person entitled to the annuity, be treated for the purposes of this section as being settled property under a separate settlement.]

(5)If there is [F225an] interest in a part of the settled property and, where that is [F225an] interest in income, there is no right of recourse to, or to the income of, the remainder of the settled property, the part of the settled property in which the F226... interest subsists shall while it subsists be treated for the purposes of this section as being settled property under a separate settlement.

[F227(6)An interest which is a disabled person's interest by virtue of section 89B(1)(a) or (b) of the Inheritance Tax Act 1984 is to be treated as an interest in possession for the purposes of this section.]

Textual Amendments

F219Word in s. 72(1) substituted (with effect in accordance with Sch. 39 para. 5(4) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 5(2)

F220S. 72(1A)-(1C) inserted (retrospective to 22.3.2006) by Finance Act 2006 (c. 25), Sch. 20 paras. 29(2), 30(2)

F221Words in s. 72(1B)(a)(iii) substituted (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2014 (c. 26), s. 60(2)(a)

F222Word in s. 72(2) substituted (with effect in accordance with Sch. 39 para. 5(4) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 5(2)

F223S. 72(2A) inserted (retrospective to 22.3.2006) by Finance Act 2006 (c. 25), Sch. 20 paras. 29(2), 30(3)

F224S. 72(3)(4) substituted (with effect in accordance with Sch. 39 para. 5(4) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 5(3)

F225Word in s. 72(5) substituted (with effect in accordance with Sch. 39 para. 5(4) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 5(2)

F226Word in s. 72(5) repealed (with effect in accordance with Sch. 39 para. 5(4) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 5(2), Sch. 41 Pt. VIII(4)

F227S. 72(6) inserted (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2014 (c. 26), s. 60(2)(b)

73 Death of life tenant: exclusion of chargeable gain.U.K.

(1)Where, by virtue of section 71(1), the assets forming part of any settled property are deemed to be disposed of and reacquired by the trustee on the occasion when a person becomes (or would but for a disability become) absolutely entitled thereto as against the trustee, then, if that occasion is the [F228death of a person entitled to an interest in possession in the settled property]

(a)no chargeable gain shall accrue on the disposal, and

(b)if on the death the property reverts to the disponer, the disposal and reacquisition under that subsection shall be deemed to be for such consideration as to secure that neither a gain nor a loss accrues to the trustee, and shall, if the trustee had first acquired the property at a date earlier than [F22931 March 1982], be deemed to be at that earlier date.

[F230(1A)Subsection (1)(b) above shall be treated as having effect in relation to a sub-fund settlement if the property does not revert to the trustees of the principal settlement in relation to that sub-fund settlement by reason only that—

(a)a sub-fund election is or has been made in respect of another sub-fund of the principal settlement, and

(b)the property becomes comprised in that other sub-fund settlement on the death of the person entitled to the interest in possession.]

(2)Where the F231... interest referred to in subsection (1) above is an interest in part only of the settled property to which section 71 applies, subsection (1)(a) above shall not apply but any chargeable gain accruing on the disposal shall be reduced by a proportion corresponding to that represented by the part.

[F232(2A)Where the interest in possession referred to in subsection (1) above is one to which the person becomes entitled on or after 22nd March 2006, subsections (1) and (2) above apply in relation to that interest only if—

(a)immediately before the person's death, the interest falls within section 72(1B), or

(b)the person dies under the age of 18 years and, immediately before the person's death, section 71D of the Inheritance Tax Act 1984 (age 18-to-25 trusts) applies to the property in which the interest subsists.]

(3)The last sentence of subsection (1) of section 72 and [F233subsections (3) [F234to (6)] of that section shall apply for the purposes of this section] as they apply for the purposes of section 72(1).

Textual Amendments

F228Words in s. 73(1) substituted (with effect in accordance with Sch. 39 para. 6(5) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 6(2)

F229Words in s. 73(1) substituted (with effect in accordance with Sch. 2 para. 71 of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 61

F230S. 73(1A) inserted (with effect in accordance with Sch. 12 para. 45 of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 42

F231Word in s. 73(2) repealed (with effect in accordance with Sch. 39 para. 6(5) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 6(3), Sch. 41 Pt. VIII(4)

F232S. 73(2A) inserted (retrospective to 22.3.2006) by Finance Act 2006 (c. 25), Sch. 20 paras. 29(2), 31

F233Words in s. 73(3) substituted (with effect in accordance with Sch. 39 para. 6(5) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 6(4)

F234Words in s. 73(3) substituted (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2014 (c. 26), s. 60(3)

74 Effect on sections 72 and 73 of relief under section 165 or 260.U.K.

(1)This section applies where—

(a)a claim for relief was made under section 165 or 260 in respect of the disposal of an asset to a trustee, and

(b)the trustee is deemed to have disposed of the asset, or part of it, by virtue of section 71(1) or 72(1)(a).

(2)Sections 72(1)(b) and 73(1)(a) shall not apply to the disposal of the asset or part by the trustee, but any chargeable gain accruing to the trustee on the disposal shall be restricted to the amount of the held-over gain (or a corresponding part of it) on the disposal of the asset to him.

(3)Subsection (2) above shall not have effect in a case within section 73(2) but in such a case the reduction provided for by section 73(2) shall be diminished by an amount equal to the proportion there mentioned of the held-over gain.

(4)In this section “held-over gain” has the same meaning as in section 165 or, as the case may be, 260.

75 Death of annuitant.U.K.

F235. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F235S. 75 repealed (with effect in accordance with Sch. 39 of the amending Act) by Finance Act 1996 (c. 8), Sch. 41 Pt. VIII(4)

76 Disposal of interests in settled property.U.K.

(1)[F236Subject to subsection (1A) below] No chargeable gain shall accrue on the disposal of an interest created by or arising under a settlement (including, in particular, an annuity or life interest, and the reversion to an annuity or life interest) by the person for whose benefit the interest was created by the terms of the settlement or by any other person except one who acquired, or derives his title from one who acquired, the interest for a consideration in money or money’s worth, other than consideration consisting of another interest under the settlement.

[F237(1A)Subject to subsection (3) below, subsection (1) above does not apply if—

(a)the settlement falls within subsection (1B) below; or

(b)the property comprised in the settlement is or includes property deriving directly or indirectly from a settlement falling within that subsection.

(1B)A settlement falls within this subsection if there has been a time when the trustees of that settlement—

(a)were [F238[F239not resident] in the United Kingdom]; or

(b)fell to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.]

(2)Subject to subsection (1) above, where a person who has acquired an interest in settled property (including in particular the reversion to an annuity or life interest) becomes, as the holder of that interest, absolutely entitled as against the trustee to any settled property, he shall be treated as disposing of the interest in consideration of obtaining that settled property (but without prejudice to any gain accruing to the trustee on the disposal of that property deemed to be effected by him under section 71(1)).

[F240(3)Subsection (1A) above shall not prevent subsection (1) above from applying where the disposal in question is a disposal in consideration of obtaining settled property that is treated as made under subsection (2) above.]

Textual Amendments

F236Words in s. 76(1) inserted (with effect in accordance with s. 128(4) of the amending Act) by Finance Act 1998 (c. 36), s. 128(1)(a)

F237S. 76(1A)(1B) inserted (with effect in accordance with s. 128(4) of the amending Act) by Finance Act 1998 (c. 36), s. 128(1)(b)(2)

F238Words in s. 76(1B)(a) substituted (with effect in accordance with Sch. 12 para. 30(4) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 30(1)(2)(a)

F239Words in s. 76(1B)(a) substituted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by Finance Act 2013 (c. 29), Sch. 46 para. 83

F240S. 76(3) inserted (with effect in accordance with s. 128(4) of the amending Act) by Finance Act 1998 (c. 36), s. 128(1)(c)(3)

Modifications etc. (not altering text)

C142S. 76(1) excluded (27.7.1993) by 1993 c. 37, s. 12, Sch. 2 Pt. I para. 21(2)(e)

[F24176A Disposal of interest in settled property: deemed disposal of underlying assets.U.K.

Schedule 4A to this Act has effect with respect to disposals for consideration of an interest in settled property.]

Textual Amendments

F241S. 76A inserted (with application in accordance with s. 91(3) of the amending Act) by Finance Act 2000 (c. 17), s. 91(1)

[F24276B Transfers of value by trustees linked with trustee borrowing.U.K.

Schedule 4B to this Act has effect with respect to transfers of value by trustees that are, in accordance with the Schedule, treated as linked with trustee borrowing.]

Textual Amendments

F242S. 76B inserted (with effect in accordance with s. 92(5) of the amending Act) by Finance Act 2000 (c. 17), s. 92(1)

F24377 Charge on settlor with interest in settlement.U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F243Ss. 77-79 omitted (with effect in accordance with Sch. 2 para. 22 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 2 para. 5

F24378 Right of recovery.U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F243Ss. 77-79 omitted (with effect in accordance with Sch. 2 para. 22 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 2 para. 5

F24379 Provisions supplemental to sections 77 and 78.U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F243Ss. 77-79 omitted (with effect in accordance with Sch. 2 para. 22 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 2 para. 5

[F24479A Restriction on set-off of trust losses.U.K.

(1)This section applies to a chargeable gain accruing to the trustees of a settlement where—

(a)in computing the gain, the allowable expenditure is reduced in consequence, directly or indirectly, of a claim to gifts relief in relation to an earlier disposal to the trustees;

(b)the transferor on that earlier disposal, or any person connected with the transferor, has at any time—

(i)acquired an interest in the settled property, or

(ii)entered into an arrangement to acquire such an interest; and

(c)in connection with that acquisition or arrangement any person has at any time received, or become entitled to receive, any consideration.

(2)Where this section applies to a chargeable gain, no allowable losses accruing to the trustees (in the year in which the gain accrues or any earlier year) may be set against the gain.

This applies to the whole of the chargeable gain (and not just the element deferred as a result of the claim to gifts relief).

(3)In this section—

(a)gifts relief” means relief under section 165 or 260; and

(b)references to losses not being allowed to be set against a chargeable gain are to the losses not being allowed as a deduction against chargeable gains to the extent that they include that gain.

(4)The references in subsection (1)(b) above to an interest in settled property have the same meaning as in Schedule 4A.]

Textual Amendments

F244S. 79A inserted (with application in accordance with s. 93(2) of the amending Act) by Finance Act 2000 (c. 17), s. 93(1)

[F24579B Attribution to trustees of gains of non-resident companies.U.K.

(1)This section applies where [F246the] trustees of a settlement are participators—

(a)in a close company, or

(b)in a company that is not resident in the United Kingdom but would be a close company if it were resident in the United Kingdom.

For this purpose “participator” has the same meaning as in [F247section 3 (see section 3B)].

(2)Where this section applies, nothing in any double taxation relief arrangements shall be read as preventing a charge to tax arising by virtue of the attribution to the trustees under [F248section 3], by reason of their participation in the company mentioned in subsection (1) above, of any part of a chargeable gain accruing to a company that is not resident in the United Kingdom.

(3)Where this section applies and—

(a)a chargeable gain accrues to a company that is not resident in the United Kingdom but would be a close company if it were resident in the United Kingdom, and

(b)all or part of the chargeable gain is treated under [F249section 3] as accruing to a close company which is not chargeable to corporation tax in respect of the gain by reason of double taxation relief arrangements, and

(c)had the company mentioned in paragraph (b) (and any other relevant company) not been resident in the United Kingdom, all or part of the chargeable gain would have been attributed to the trustees by reason of their participation in the company mentioned in subsection (1) above,

[F250section 3(7)] shall apply as if the company mentioned in paragraph (b) above (and any other relevant company) were not resident in the United Kingdom.

(4)The references in subsection (3) above to “any other relevant company" are to any other company which if it were not resident in the United Kingdom would be a company in relation to which [F251section 3(7)] applied with the result that all or part of the chargeable gain was attributed to the trustees as mentioned in that subsection.]

Textual Amendments

F245S. 79B inserted (with application in accordance with s. 94(2) of the amending Act) by Finance Act 2000 (c. 17), s. 94(1)

F246Word in s. 79B(1) inserted (with effect in accordance with Sch. 12 para. 14(2) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 14(1)

F247Words in s. 79B(1) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 30(2)

F248Words in s. 79B(2) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 30(3)

F249Words in s. 79B(3) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 30(4)(a)

F250Words in s. 79B(3) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 30(4)(b)

F251Words in s. 79B(4) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 30(5)

Migration of settlements, non-resident settlements and dual resident settlementsU.K.

80 Trustees ceasing to be resident in U.K.U.K.

(1)This section applies if the trustees of a settlement become at any time (“the relevant time”) [F252not resident] in the United Kingdom.

(2)The trustees shall be deemed for all purposes of this Act—

(a)to have disposed of the defined assets immediately before the relevant time, and

(b)immediately to have reacquired them,

at their market value at that time.

(3)Subject to subsections (4) and (5) below, the defined assets are all assets constituting settled property of the settlement immediately before the relevant time.

(4)If immediately after the relevant time—

(a)the trustees carry on a trade in the United Kingdom through a branch or agency, and

(b)any assets are situated in the United Kingdom and either used in or for the purposes of the trade or used or held for the purposes of the branch or agency,

the assets falling within paragraph (b) above shall not be defined assets.

(5)Assets shall not be defined assets if—

(a)they are of a description specified in any double taxation relief arrangements, and

(b)were the trustees to dispose of them immediately before the relevant time, the trustees would fall to be regarded for the purposes of the arrangements as not liable in the United Kingdom to tax on gains accruing to them on the disposal.

(6)Section 152 shall not apply where the trustees—

(a)have disposed of the old assets, or their interest in them, before the relevant time, and

(b)acquire the new assets, or their interest in them, after that time,

unless the new assets are excepted from this subsection by subsection (7) below.

(7)If at the time when the new assets are acquired—

(a)the trustees carry on a trade in the United Kingdom through a branch or agency, and

(b)any new assets are situated in the United Kingdom and either used in or for the purposes of the trade or used or held for the purposes of the branch or agency,

the assets falling within paragraph (b) above shall be excepted from subsection (6) above.

(8)In this section “the old assets” and “the new assets” have the same meanings as in section 152.

Textual Amendments

F252Words in s. 80(1) substituted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by Finance Act 2013 (c. 29), Sch. 46 para. 84

Modifications etc. (not altering text)

C143S. 80(4)(a)(b) modified (with effect in accordance with s. 153(4) of the amending Act) by Finance Act 2003 (c. 14), s. 153(2)(b)

C144S. 80(7)(b) modified (with effect in accordance with s. 153(4) of the amending Act) by Finance Act 2003 (c. 14), s. 153(2)(b)

[F25380APostponing gain or loss under section 80(2): interests in UK landU.K.

(1)This section applies if—

(a)an interest in UK land is deemed to have been disposed of under section 80(2) by trustees of a settlement at any time, and

(b)the trustees make an election under this subsection.

(2)The gain or loss that, but for this subsection, would have accrued to the trustees at that time is not to accrue at that time.

(3)But, on a subsequent disposal by the trustees of the whole or part of the interest in UK land, the whole or a corresponding part of the gain or loss is treated as accruing on the subsequent disposal.

(4)This gain or loss is in addition to any gain or loss that actually accrues on the subsequent disposal.

(5)In this section “interest in UK land” has the meaning given by section 1C.]

Textual Amendments

F253S. 80A substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 31

81 Death of trustee: special rules.U.K.

(1)Subsection (2) below applies where—

(a)section 80 applies as a result of the death of a trustee of the settlement, and

(b)within the period of 6 months beginning with the death, the trustees of the settlement become resident F254... in the United Kingdom.

(2)That section shall apply as if the defined assets were restricted to such assets (if any) as—

(a)would be defined assets apart from this section, and

(b)fall within subsection (3) or (4) below.

(3)Assets fall within this subsection if they were disposed of by the trustees in the period which—

(a)begins with the death, and

(b)ends when the trustees become resident