Taxation of Chargeable Gains Act 1992, section 16

Computation of losses

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

(1)Subject to [F51sections 261B, 261D and 263ZAF51] 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.

[F52 (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.F52]

F53 (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F54 (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.F54]

F55 (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F56 (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) . F56]

Definitions used in section 16 14

assets

(a) the reference to “assets” were a reference to “property”, and

Defined in Sch.4ZA para.22(2) · see it in the full Act
asset

In this sub-paragraph “asset” includes part of an asset.

Defined in Sch.8B para.6(1) · see it in the full Act
allowable loss

“allowable loss” shall be construed in accordance with sections 8(2) , 16 , 16A , 261B, 261D and 263ZA ;

Defined in s.288(1) · see it in the full Act

(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.

Defined in s.16A(1) · see it in the full Act
year of assessment

“year of assessment” means tax year;

Defined in s.288(1) · see it in the full Act
notice

“notice” means notice in writing;

Defined in s.288(1) · see it in the full Act
the Board

“the Board” means the Commissioners of Inland Revenue;

Defined in s.288(1) · see it in the full Act
the Management Act

“the Management Act” means the Taxes Management Act 1970 ;

Defined in s.288(1) · see it in the full Act
the individual

13C (1) The receipt of the replacement value by the original supplier shall be disregarded for the purposes of paragraph 13B above, as it applies in relation to the shares, to the extent to which that receipt has previously been set (under that paragraph) against any receipts of value which are, in consequence, disregarded for the purposes of paragraph 13 above as that paragraph applies in relation to those shares or any other shares subscribed for by the individual in question (“the individual”).

Defined in Sch.5B para.13C(1) · see it in the full Act
split year

“split year”, as respects an individual, means a tax year that, as respects that individual, is a split year within the meaning of Part 3 of Schedule 45 to the Finance Act 2013 (statutory residence test: split year treatment);

Defined in s.288(1) · see it in the full Act
the overseas part

(1ZB) A reference in this Act to “the overseas part” or “the UK part” of a split year is to be read in accordance with Part 3 of Schedule 45 to the Finance Act 2013 (statutory residence test: split year treatment).

Defined in s.288(1ZB) · see it in the full Act
tax year

(1ZA) In this Act and other enactments relating to capital gains tax “tax year” means a year beginning on 6 April and ending on the following 5 April; and “the tax year 2008-09” means the tax year beginning on 6 April 2008 (and any corresponding expression in which two years are similarly mentioned is to be read in the same way).

Defined in s.288(1ZA) · see it in the full Act
foreign gain claim

“foreign gain claim” means a claim under paragraph 1 of Schedule D1;

Defined in s.288(1) · see it in the full Act
foreign income claim

“foreign income claim” means a claim under section 845A of ITTOIA 2005;

Defined in s.288(1) · see it in the full Act
foreign employment election

“foreign employment election” means a claim under section 41M of ITEPA 2003;

Defined in s.288(1) · see it in the full Act

Cases considering section 16 6

Edward Cumming-Bruce v The Commissioners for HMRC

[2022] UKUT 233 (TCC) · 25 August 2022Interprets

The Tribunal treated capital losses as calculated in the same way as capital gains when construing the scheme governing annual aggregation of gains and losses. (see para [52]) The Tribunal applied the provision with section 16(2A) and the claims procedure to conclude that allowable losses must be claimed in the return for the year in which they arise. (see paras [52]-[55]) The provision requires quantification of a capital loss and applies the claims procedure to its notification. It does not create a separate preliminary stage requiring HMRC to determine allowability before the loss can be included in the self-assessment return. (see paras [41]-[46]; [52]-[53])

Sanderson v HM Revenue and Customs

[2016] EWCA Civ 19 · 21 January 2016

The provision formed part of the statutory context for deciding whether the Castle Trust transactions produced an allowable loss (see para [30]).

HM Revenue and Customs v The Executors of Lord Howard of Henderskelfe

[2014] EWCA Civ 278 · 19 March 2014

Section 16(2) formed part of the purposive explanation for the exemption: the legislative aim was chiefly to prevent disposals of movable wasting assets from generating allowable losses, rather than to confer a general tax benefit on exceptional gains. (see para [41])

What each judgment says about section 16 is in the case-law panel in the full Act.

Amendments and notes

8 notes from legislation.gov.uk

Amendments

  1. F51Words in s. 16(1) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 298 (with Sch. 2)
  2. F52S. 16(2A) inserted (with effect in accordance with s. 103(7) of the amending Act) by Finance Act 1995 (c. 4), s. 113(1)
  3. F53S. 16(3) omitted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 1 para. 24
  4. F54S. 16(3A) inserted (with effect in accordance with Sch. 45 para. 153(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 45 para. 97
  5. F55S. 16(4) omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 61
  6. F56S. 16(4)(5) inserted (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), s. 39(6)(11)

Modifications

  1. C75S. 16 excluded (with effect in accordance with art. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 42(2)
  2. C76S. 16 excluded by The Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964), reg. 85Z4 (as inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by S.I. 2010/294, regs. 1(1), 21)