[^F1Part 1 Capital gains tax and corporation tax on chargeable gains

Chapter 1 Capital gains tax

Charge to capital gains tax

1 Capital gains tax

(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 charge

1A Territorial scope

(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—

[^F2 (za)Schedule D1 (relief for new residents on foreign gains),^F2]

(a)Schedule 1 (foreign gains accruing to individuals to whom the remittance basis [^F3 applied^F3] ),

(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, ^F4... 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.

1B Non-UK residents: UK branch or agency

(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).

1C Non-UK residents: disposing of an “interest in UK land”

(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—

• “ franchise ” means a grant from the Crown such as the right to hold a market or fair, or the right to take tolls, and

• “ land ” includes—

  (a)

  buildings and structures, and

  (b)

  land under the sea or otherwise covered by water.

1D Non-UK residents: assets deriving 75% of value from UK land etc

(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 losses

1E Losses deductible only when within scope of tax etc

(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.

^F5 (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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 [^F6 paragraph 5 of Schedule D1 (relief for new residents on foreign gains)^F6] .

(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).

1F Allowable losses to be used in most beneficial way etc

(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 years

1G Gains accruing to UK resident individuals in split years

(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 CGT

1H The main rates of CGT

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

(a)section 169N ([^F7 business asset disposal relief^F7] : rate of [^F8 14%^F8] ), and

(b)section 169VC (investors' relief: rate of [^F9 14%^F9] ).

^F10 (1A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F11 (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)[^F12 Chargeable gains other than carried interest gains (see subsections (4B) and (9) to (11))^F12] accruing in a tax year to an individual are charged to capital gains tax at a rate of [^F13 18%^F13] or [^F14 24%^F14] .

(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).

^F15 (4A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F16 (4B)Chargeable gains accruing in a tax year to an individual that are carried interest gains are charged to capital gains tax at a rate of 32%.^F16]

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

^F17 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)carried interest gains,

are charged to capital gains tax at a rate of [^F18 32%^F18] .

(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 [^F19 24%^F19] .

^F20 (7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8)^F21... Chargeable gains accruing in a tax year to the trustees of a settlement are charged to capital gains tax at a rate of [^F22 24%^F22] .

(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), ^F23...

[^F24 (aa)under section 103KFA(3) (gains on deemed carried interest where election made), or^F24]

(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.

1I Income taxed at higher rates or gains exceeding unused basic rate band

[^F25 (A1)This section applies for the purpose of determining the rate of capital gains tax that applies to gains accruing to an individual in a tax year that are not carried interest gains and, in the following provisions of this section, references to gains (or amounts chargeable to capital gains tax) do not include carried interest gains.^F25]

(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 [^F26 charged at the rate of 24%.^F26]

(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”) [^F27 is charged at the rate of 24%. ^F27]

(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 [^F28 14% ^F28] 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 [^F29 are then charged at the rate of 24%.^F29]

(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.

[^F30 (7)The individual may allocate so much of the unused part of the individual’s basic rate band [^F31 as then remains to gains other than entrepreneur or investor gains.^F31]

(8)The effect of the allocation is that the gains to which the allocation is made are charged at the rate of 18%.

(9)Any gains to which no allocation is made are [^F32 charged at the rate of 24%.^F32,F30]]

1J Section 1I: definitions and other supplementary provision

(1)For the purposes of section 1I—

• a “ higher income tax rate ” means—

  (a)

  the higher rate or the default higher rate,

  (b)

  the savings higher rate, or

  (c)

  the dividend upper rate, and

• “ the unused part of the individual's basic rate band ” means the amount by which the basic rate limit exceeds the individual's Step 3 income.

(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—

• “ the individual's Step 3 income ” means so much of the individual's total income for the tax year as is left after taking Step 3 under section 23 of ITA 2007 (income tax liability calculation), and

• “ life insurance gains ”, in relation to an individual, means the amount or amounts treated as the individual's income as a result of section 465 of ITTOIA 2005 (gains from contracts for life insurance).

(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 amount

1K Annual exempt amount

(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 [^F33 £3,000^F33] .

^F34 (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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

[^F35 (a)^F35] section 809B of ITA 2007 (claim for remittance basis) applies to the individual for the year [^F36 , or

(b)the individual makes a foreign gain claim, a foreign income claim or a foreign employment election for that tax year.^F36]

(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.

^F371L Increasing annual exempt amount to reflect increases in CPI _cross-notes

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

Temporary periods of non-residence

1M Temporary non-residents

(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)—

• “the period of return”

• “temporarily non-resident”

• “the temporary period of non-residence”.

(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.

1N Section 1M(1): assets acquired in temporary period of non-residence

(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.

Interpretation

1O Definitions used in Chapter

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 2 Corporation tax on chargeable gains

Corporation tax on chargeable gains: the general scheme

2 Corporation tax on chargeable gains

(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.

2A Company's total profits to include chargeable gains _cross-notes

(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.

[^F38 (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.^F38]

Territorial scope

2B Territorial scope of charge to corporation tax on chargeable gains

(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.

2C Non-UK resident company with UK permanent establishment

(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 etc

2D Application of CGT principles in calculating gains and losses

(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.

2E References to income tax or Income Tax Acts in case of companies

(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.

2F Interaction of capital gains tax and corporation tax

(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.

Supplementary

2G Assets of a company vested in a liquidator

(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 3 Attribution of gains of non-UK resident close companies

Gains of non-UK resident companies not otherwise chargeable

3 Gains attributed to UK resident individuals etc

(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.

3A Gains connected to avoidance or foreign activities etc

(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.

^F39 (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F39 (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F39 (5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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).

3B Participators and their interests

(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 charges

3C Prevention of double UK taxation

(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.

[^F40Individuals who were non-UK domiciled^F40] and temporary non-residents

3D [^F41Individuals who were non-UK domiciled^F41]

(1)This section applies if, as a result of section 3, an amount in respect of a gain accruing to a company in [^F42 tax year 2024-25 or an earlier tax year^F42] [^F43 was^F43] apportioned to an individual who [^F43 was^F43] 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.

3E Temporary non-residents

(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)—

• “the period of return”

• “temporarily non-resident”

• “the temporary period of non-residence”.

Application to groups

3F Non-resident groups of companies

(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—

• “ non-resident company ” means a company which is not resident in the United Kingdom,

• “non-resident group of companies”—

  (a)

  in the case of a group none of whose members are resident in the United Kingdom, means that group, and

  (b)

  in the case of a group some of whose members are not resident in the United Kingdom, means the members which are not resident in the United Kingdom, and

• “ group ” is to be read in accordance with section 170.

Supplementary

3G Supplementary provisions

(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.^F1]

^F1Capital gains tax

^F14 Rates of capital gains tax

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

^F14A Section 4: special cases

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

^F14B Deduction of losses etc in most beneficial way

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

^F14BA Rates, and use of unused basic rate band, in certain cases

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

^F14BB Residential property gain or loss

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

^F15 Accumulation and discretionary settlements.

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

^F16 Other special cases.

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

^F17 Time for payment of tax.

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

Corporation tax

^F18 Company’s total profits to include chargeable gains.

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

^F1Residence etc.

^F19 Residence, including temporary residence.

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

^F110 Non-resident with United Kingdom branch or agency.

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

^F110A Temporary non-residents.

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

^F110AA Section 10A: supplementary

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

^F110B Non-resident company with United Kingdom permanent establishment

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

^F111 Visiting forces and official agents

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

^F112 Non-UK domiciled individuals to whom remittance basis applies

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

^F113 Attribution of gains to members of non-resident companies.

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

^F113A Section 13(5): interpretation

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

^F114 Non-resident groups of companies.

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

^F114A Section 13: non-UK domiciled individuals

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

^F1CommentaryRef Ref="key-8f1b51e533ff9b07068f2c9150edcf5f"/>UK residential property: non-resident CGT

^F114B Meaning of “non-resident CGT disposal”

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

^F114C Meaning of “disposal of a UK residential property interest”

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

^F114D Persons chargeable to capital gains tax on NRCGT gains

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

^F114E Further provision about use of NRCGT losses

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

^F114F Persons not chargeable under section 14D if a claim is made

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

^F114G Section 14F: divided companies

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

^F114H Section 14F: arrangements for avoiding tax

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

Part II General Provisions relating to computation of gains and acquisitions and disposals of assets

Chapter I Introductory

15 Computation of gains.

(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. _cross-notes

(1)Subject to [^F44sections 261B, 261D and 263ZA^F44] 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.

[^F45 (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.^F45]

^F46 (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F47 (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.^F47]

^F48 (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F49 (4)A qualifying foreign loss accruing to an individual in a tax year is not an allowable loss if a foreign gain claim, a foreign income claim or a foreign employment election has effect in relation to the individual for that tax year.

(5) In subsection (4), “ qualifying foreign loss ” has the same meaning as in Schedule D1 (see paragraph 6 of that Schedule) . ^F49]

^F5016ZA Losses: non-UK domiciled individuals

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

^F5116ZB Individual who has made election under section 16ZA: foreign chargeable gains remitted in tax year after tax year in which accrue

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

^F5116ZC Individual who has made election under section 16ZA and to whom remittance basis applies

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

^F5116ZD Section 16ZC: supplementary

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

[^F5216A Restrictions on allowable losses

(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)—

• “ arrangements ” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

• “ tax advantage ” means—

  (a)

  relief or increased relief from tax,

  (b)

  repayment or increased repayment of tax,

  (c)

  the avoidance or reduction of a charge to tax or an assessment to tax, or

  (d)

  the avoidance of a possible assessment to tax,

  and for the purposes of this definition “ tax ” means capital gains tax, corporation tax or income tax.

(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.^F52]

17 Disposals and acquisitions treated as made at market value. _cross-notes

(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.

18 Transactions between connected persons.

(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.

[^F53 (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.^F53]

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

(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.

(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 II Assets and disposals of assets

General provisions

21 Assets and disposals. _cross-notes

(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

[^F54 (b)currency, with the exception (subject to express provision to the contrary) of sterling,^F54]

(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.

22 Disposal where capital sums derived from assets. _cross-notes

(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.

[^F55 (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.^F55]

23 Receipt of compensation and insurance money not treated as a disposal. _cross-notes

(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.

[^F56 (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.^F56]

24 Disposals where assets lost or destroyed, or become of negligible value. _cross-notes

(1)Subject to the provisions of this Act and, in particular to [^F57sections 140A(1D), 140E(7) and 144^F57] , 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.

[^F58 (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.^F58]

[^F59 (2)[^F60 Where a negligible value claim is made:^F60]

(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.^F59]

(3)For the purposes of [^F61this section^F61] , 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 [^F62where a building or structure is so regarded,^F62] 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.

[^F63 (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. ^F63]

[^F64 (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.^F64]

[^F6524A Structures and buildings contributions allowances: destruction of asset

(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.^F65]

25 Non-residents: deemed disposals. _cross-notes

(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.

[^F66 (3A)Subsection (3) above shall not apply if—

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

[^F67 (b)on ceasing to carry on the trade the asset is disposed of in circumstances in which section 139 or 171 applies.^F67,F66]]

^F68 (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—

• “ exploration or exploitation asset ” means an asset used in connection with exploration or exploitation activities carried on in the United Kingdom or a designated area, and

• “ designated area ” and “ exploration or exploitation activities ” have the same meanings as in section 276.

(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 [^F69the disposal would be chargeable to capital gains tax under section 1A(3)(a) or to corporation tax under section 2B(3).^F69]

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

[^F7025ZA Postponing gain or loss under section 25(3): interests in UK land

(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. ^F70]

[^F7125A Long funding leases of plant or machinery: deemed disposals

(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 [^F72 the relevant disposal value^F72] , 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.

[^F73 (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.^F73]

(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)—

• “ commencement ”, in relation to the term of a lease,

• “lessor”,

• “long funding lease”,

• “long funding finance lease”,

• “long funding operating lease”,

• ^F74 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “ the term ”, in relation to a lease,

• “termination”,

• “termination amount”. ^F71]

26 Mortgages and charges not to be treated as disposals.

(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.

[^F7526A Transfers in respect of dormant assets

(1)This section applies where there is a transfer in respect of a dormant asset.

(2)There is a transfer in respect of a dormant asset where an amount is transferred by an institution in respect of an asset—

(a)to an authorised reclaim fund, with the result that section 1 of the 2008 Act or section 2, 5, 8, 12 or 14 of the 2022 Act applies in relation to the asset, or

(b)to an authorised reclaim fund and one or more charities, with the result that section 2 of the 2008 Act applies in relation to the asset.

(3)For the purposes of this Act—

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

(b) rights which a person (“ P ”) acquires under Part 1 of the 2008 Act or Part 1 or sections 22 to 25 of the 2022 Act (as the case may be) after the transfer 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.

(4)In this section—

• “ the 2008 Act ” means the Dormant Bank and Building Society Accounts Act 2008 ;

• “ the 2022 Act ” means the Dormant Assets Act 2022 ;

• “ asset ” means an asset within the scope of the dormant assets scheme (see section 1(6) of the 2022 Act);

• “ authorised reclaim fund ” has the same meaning as in the Dormant Assets Acts 2008 to 2022 ;

• “the original rights” are P’s rights against the institution immediately before the transfer. ^F75]

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

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. _cross-notes

(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.

[^F7628A Contracts completed after ordinary notification period

(1)This section applies in relation to chargeable gains or allowable losses accruing on the disposal and acquisition of an asset under a contract where the asset is conveyed or transferred after the ordinary notification period relating to the chargeable period in which the asset was disposed of and acquired in accordance with section 28.

(2)The following references are to be read as references to the chargeable period in which the conveyance or transfer takes place—

(a)the references in section 7(1C) of the Management Act (income tax and capital gains tax: period for giving notice of chargeability) to the year of assessment;

(b)the references in sections 34(1) and 36(1) and (1A) of the Management Act (income tax and capital gains tax: time limits for assessments) to the year of assessment to which an assessment relates;

(c)the reference in section 43(1) of the Management Act (income tax and capital gains tax: time limit for making claims) to the year of assessment to which a claim relates;

(d)the reference in paragraph 2(2) of Schedule 18 to the Finance Act 1998 (corporation tax: period for giving notice of chargeability) to the accounting period;

(e)the references in paragraph 46(1), (2) and (2A) of Schedule 18 to the Finance Act 1998 (corporation tax: time limits for assessments) to the accounting period to which an assessment relates;

(f)the reference in paragraph 55 of Schedule 18 to the Finance Act 1998 (general time limit for making claims) to the accounting period to which a claim for relief relates.

(3) For the purposes of subsection (1) , the “ ordinary notification period ” relating to a chargeable period is—

(a)in the case of capital gains tax, the period of 6 months from the end of the chargeable period, and

(b)in the case of corporation tax, the period of 12 months from the end of the chargeable period.

(4)Where a claim, election, application or notice is made, given, revoked or varied by virtue of this section, all such adjustments shall be made, whether by way of discharge or repayment of tax or the making of amendments, assessments or otherwise, as are required to take account of the effect of the taking of that action on any person’s liability to tax for any chargeable period.^F76]

Value shifting

29 General provisions.

(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. _cross-notes

(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)^F77the value of the asset ... 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.

[^F78 (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).^F78]

(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 [^F79in a case where^F79] 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 [^F80is^F80] 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 [^F81is^F81] 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).

^F82 (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.

[^F8331 Disposal of shares or securities by a company

(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—

• “ arrangements ” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

• “ exempt distribution ” means a distribution which—

  (a)

  for the purposes of section 931D of CTA 2009 (exemption from charge to tax: distributions received by companies that are not small), falls within an exempt class by virtue of section 931H of that Act (dividends derived from transactions not designed to reduce tax), or

  (b)

  would be within paragraph (a) but for the recipient being a small company (within the meaning of section 931S of that Act) in the accounting period of the recipient in which the distribution was received;

• “ group ” is to be construed in accordance with section 170;

• “ securities ” has the same meaning as in section 132;

• “ tax advantage ” means the avoidance of a liability to corporation tax in respect of chargeable gains. ^F83]

^F8331A Asset-holding company leaving the group.

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

^F8332 Disposals within a group followed by a disposal of shares.

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

^F8333 Provisions supplementary to sections 30 to 32.

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

^F8333A Modification of sections 30 to 33 in relation to chargeable intangible asset

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

^F8334 Transactions treated as a reorganisation of share capital.

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

Chapter III Computation of gains: General provisions

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

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

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

(2)[^F84 In^F84] 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 [^F85that person^F85] , at its market value on that date.

[^F86 (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)).^F86]

(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)^F87where, 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, ...

[^F88 (ca)where, by virtue of section 195B, 195C or 195E, neither a gain nor a loss accrues to the person making the disposal, or^F88]

(d)where neither a gain nor a loss would accrue by virtue of any of [^F89the no gain/no loss provisions.^F89]

[^F90 (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 [^F91 that person^F91] .

(5)If a person so elects, disposals made by [^F92 that person^F92] (including any made by [^F92 that person^F92] 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 [^F93 an officer of the Board^F93] 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—

[^F94 (a)^F95. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(aa)^F96... 2 years after the end of the accounting period in which the disposal is made; or

(b)^F97... at such later time as the Board may allow;^F94]

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 [^F98 that person^F98] 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 [^F99 for the purposes of corporation tax^F99] 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 [^F100 for the purposes of capital gains tax and corporation tax^F100] .^F90]

[^F10135A Disposal of asset acquired on no gain/no loss disposal

(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).^F101]

36 Deferred charges on gains before 31st March 1982.

Schedule 4, which provides for the reduction of a deferred charge to [^F102corporation tax in respect of chargeable gains^F102] where the charge is wholly or partly attributable to an increase in the value of an asset before 31st March 1982, shall have effect.

[^F103Re-basing for non-residents for UK land etc held on 5 April 2019

36A Re-basing in relation to direct or indirect disposals of UK land

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).^F103]

Allowable deductions

37 Consideration chargeable to tax on income. _cross-notes

(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.

[^F104 (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 _dfnITTOIA 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 _dfnITTOIA 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 _dfnITTOIA 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).^F104]

(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—

[^F105 (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.^F105]

[^F106 See also section 37A(4) and (5) (consideration on disposal of certain leases).^F106]

[^F107 (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).^F107]

(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.

^F108 (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F109 (5)If—

(a) because section [^F110 517G(4) or (6) of ITA 2007 (transactions in land: the chargeable person) applies, an amount is charged to income tax as income of ^F110] 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.

[^F111 (5A)If—

(a) because section [^F112 356OG(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 ^F112] 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.^F111]

(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 ). ^F109]

[^F11337A Consideration on disposal of certain leases

(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.^F113]

[^F11437B Consideration on certain disposals: structures and buildings allowances

(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).^F114]

38 Acquisition and disposal costs etc. _cross-notes

(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 [^F115or stamp duty land tax^F115] ) 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.

39 Exclusion of expenditure by reference to tax on income. _cross-notes

(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 [^F116profits^F116] 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 [^F116profits^F116] 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 [^F116profits^F116] or losses of the trade for the purposes of income tax.

(3)^M1,M2No account shall be taken of any relief under Chapter II of Part IV of the Finance Act 1981 or under Schedule 5 to the Finance 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.

[^F117 (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 _dfnITTOIA 2005 (disguised interest) (but see section 381D of that Act).^F117]

[^F118 (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.^F118]

[^F119 (4)If—

(a) because section [^F120 517G(4) or (6) of ITA 2007 (transactions in land: the chargeable person) applies, an amount is charged to income tax as income of ^F120] 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.^F119]

[^F121 (5)If—

(a) because section [^F122 356OG(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 ^F122] 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.^F121]

[^F12339A Exclusion of certain expenditure: structures and buildings allowances

(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.^F123]

40 Interest charged to capital.

(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.

[^F124 (4)In consequence of Chapter 2 of Part 4 of the Finance Act 1996 (c. 8) (loan relationships) [^F125 and CTA 2009 (Part 5 of which re-enacts that Chapter)^F125] this section does not have effect in relation to interest referable to an accounting period ending on or after 1st April 1996.^F124]

41 Restriction of losses by reference to capital allowances and renewals allowances. _cross-notes

(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—

[^F126 (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,^F126]

(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—

[^F127 (a)any allowance under the Capital Allowances Act,^F127]

[^F128 (zaa)any deduction allowable in respect of capital expenditure in calculating profits on the cash basis (see sections 33A and 307B of _dfnITTOIA 2005),^F128]

[^F129 (aa)any deduction under section 311A of _dfnITTOIA 2005 or section 250A of CTA 2009 (replacement domestic items relief),^F129]

(b)^F130... [^F131any deduction under section 315 of ITTOIA 2005^F131][^F132 or section 254 of CTA 2009^F132] (expenditure on sea walls), and

(c)^F134any deduction in computing [^F133profits^F133] allowable under ... [^F135section 170 of ITTOIA 2005^F135][^F136 or section 147 of CTA 2009^F136] (cemeteries).

[^F137 (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).^F137]

(5) In this section “ renewals allowance ” means a deduction allowable in computing the [^F133 profits ^F133] 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.

[^F138 (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.^F138]

(7)Where the disposal is of [^F139plant or machinery^F139] in relation to expenditure on which allowances or charges have been made under [^F140Part 2 of the Capital Allowances Act, [^F141 and subsection (6A) does not apply,^F141] and neither Chapter 15 (assets provided or used only partly for qualifying activity) nor Chapter 16 (partial depreciation subsidies) of that Part^F140] applies, the capital allowances to be taken into account under this section are to be regarded as equal to the difference between the [^F142qualifying expenditure^F142] incurred, or treated as incurred, under that Part on the provision of the [^F139plant or machinery^F139] by the person making the disposal and the disposal value required to be brought into account in respect of the [^F139plant or machinery^F139] .

[^F143 (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.^F143]

[^F144 (9)In this section—

(a)in relation to a trade, profession or vocation, references to calculating profits on the cash basis are to [^F145 be construed in accordance with Part 2 of ITTOIA 2005 (see section 24A of that Act)^F145] , 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—

• “ capital expenditure ” means expenditure of a capital nature incurred on, or in connection with, the creation, construction, acquisition, alteration or disposal of an asset, and

• “ 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). ^F144]

[^F14641A Restriction of losses: long funding leases of plant or machinery

(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)—

• “ commencement ”, in relation to the term of a lease,

• “long funding lease”,

• “market value”,

• “ the term ”, in relation to a lease,

• “termination”. ^F146]

42 Part disposals. _cross-notes

(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.

43 Assets derived from other assets.

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 assets

44 Meaning of “wasting asset".

(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.

(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.

[^F147 (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).^F147]

(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.

46 Straightline restriction of allowable expenditure.

(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.

(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.

[^F148Cash basis accounting

47A [^F149Exemption for certain disposals under, or after leaving, cash basis^F149]

(1)No chargeable gain shall accrue on the disposal of, or of an interest in, an asset if conditions [^F150 A, B and D^F150] are met in relation to the asset.

[^F151 (2)Condition A is that the asset is not land.^F151]

(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[^F152 , vocation or property business^F152] carried on by the person.

^F153 (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F154 (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 _dfnITTOIA 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 _dfnITTOIA 2005 or (as the case may be) section 307E(9) of that Act which arise from the disposal mentioned in subsection (1). ^F154]

[^F155 (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.^F155]

(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 [^F156 qualified for capital allowances^F156] ,

(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[^F157 , or to the expenditure qualifying for capital allowances^F157] .

[^F158 (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). ^F158,F148]]

^F15947B Disposals made by persons after leaving cash basis

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

Miscellaneous provisions

48 Consideration due after time of disposal. _cross-notes

[^F160 (1)^F160] 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 [^F161subsequently 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^F161] .

[^F162 (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 [^F163 Part 5 of CTA 2009 (see sections 302(5) and 313(6))^F163] .^F162]

[^F16448A Unascertainable consideration

(1)This section applies where—

[^F165 (a) a person (“P”) has made a disposal (“the original disposal”) on which a relevant non-resident gain or relevant non-resident loss accrued, ^F165]

(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 [^F166 P 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)— ^F166]

(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.

• Step 1 Any amount by which the ascertained consideration exceeds the relevant original consideration is treated as consideration (or further consideration) accruing on the original disposal. If the relevant original consideration exceeds the ascertained consideration, the consideration accruing on the original disposal is treated as reduced by the amount of the excess.

• Step 2 Compute the difference that the adjustment under step 1 makes to what (if any) [^F167 relevant non-resident gain or relevant non-resident loss ^F167] or other gain or loss accrues on the original disposal (computing this separately for each type of gain or loss). The difference is “positive” if a loss is decreased (to nil or otherwise) or a gain created or increased. The difference is “negative” if a gain is reduced (to nil or otherwise) or a loss created or increased.

• Step 3 Any positive amount computed under step 2 is treated for the purposes of this Act and the Management Act as a gain (of the type appropriate to the computation) accruing to P at the time of the receipt of the ascertained consideration. Any negative amount computed under step 2 is treated for the purposes of this Act and the Management Act as a loss (of the type appropriate to the computation) accruing to P at the time of the receipt of the ascertained consideration.

(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.

[^F168 (7)In this section—

• “ relevant non-resident gain ” means—

  (a)

  a gain that falls to be dealt with by section 1A(3) because the asset disposed of is within paragraph (b) or (c) of that subsection, or

  (b)

  a gain that falls to be dealt with by section 1A(1) in accordance with section 1G(2) because the asset disposed of is within section 1A(3)(b) or (c), and

• “ relevant non-resident loss ” means an allowable loss accruing on a disposal which, had a gain accrued instead, would have been a relevant non-resident gain. ^F168,F164]]

49 Contingent liabilities.

(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.

[^F169 (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.^F169]

(3)Subsection (2) above also applies where the disposal in question was before the commencement of this section.

50 Expenditure reimbursed out of public money.

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.

(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.

(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)^F170For 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 ... just and reasonable.

(5) In this Chapter “ capital allowance ” and “ renewals allowance ” have the meanings given by subsections (4) and (5) of section 41 [^F171 (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)) ^F171] .

Chapter IV Computation of gains: the indexation allowance

General

[^F17252A Chapter to apply only for corporation tax purposes

This Chapter applies only for the purposes of corporation tax.^F172]

53 The indexation allowance and interpretative provisions.

(1) Subject to any provision to the contrary, [^F173 if 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)^F173] ;

and any reference in this Act to an indexation allowance or to the making of an indexation allowance shall be construed accordingly.

^F174 (1A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F175 (1B)Indexation allowance is not allowed in respect of changes shown by the retail prices indices for months after December 2017.^F175]

(2)For the purposes of [^F176this Chapter^F176] , in relation to any disposal of an asset—

[^F177 (a) “ unindexed gain ” means the amount of the gain on the disposal computed in accordance with this Part ^F177] ; and

(b) “ relevant allowable expenditure ” means, subject to subsection (3) below, any sum which, in the computation of the unindexed [^F178 gain ^F178] was taken into account by virtue of paragraph (a) or paragraph (b) of section 38(1).

[^F179 (2A)Notwithstanding anything in section 16 of this Act, this section shall not apply to a disposal on which a loss accrues.^F179]

(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)^F180Sections 54 and 108 and this section have effect subject to sections 56, 57, 109, 110 ... , 113, 131 and 145.

54 Calculation of indexation allowance.

(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—

^F182 (1A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F183 (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.^F183]