Taxation of Chargeable Gains Act 1992, section 22

Disposal where capital sums derived from assets

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

(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.

[F62 (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.F62]

Definitions used in section 22 8

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
surrender

(7A) In the application of this Act to Scotland “surrender” includes renunciation.

Defined in s.288(7A) · see it in the full Act
company

“company” includes any body corporate or unincorporated association but does not include a partnership, and shall be construed in accordance with section 99 ;

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

(5) In this paragraph “company” and “group” shall be construed in accordance with section 170(2) to (9).

Defined in Sch.2 para.5(5) · see it in the full Act
capital distribution

In this sub-paragraph “capital distribution” has the same meaning as in section 122.

Defined in Sch.5AA para.4(4) · see it in the full Act
tax

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

Defined in s.16A(2) · see it in the full Act
income

(6) Sub-paragraphs (4) and (5) above apply for the purposes of paragraph (b) of sub-paragraph (1) above as they apply for the purposes of paragraph (a), reading “income” for “property".

Defined in Sch.5 para.2(6) · see it in the full Act
CTA 2009

“CTA 2009” means the Corporation Tax Act 2009 ;

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

Cases considering section 22 7

Mertrux Ltd v HM Revenue and Customs

[2013] EWCA Civ 821 · 9 July 2013Interprets

The payment was a capital sum derived from assets because it compensated Mertrux for the surrender or release of its contractual right to continue operating the dealership. That constituted a disposal of an asset even though no equivalent dealership asset was acquired by the payer. (see paras [17], [30], [39]-[40])

DMWSHNZ Ltd v HM Revenue and Customs

[2015] EWCA Civ 1036 · 20 October 2015

Cited as an example that the Act may treat a disposal as occurring without a corresponding acquisition; it helps explain why section 171A’s reference to a disposal to C has limiting significance. (see paras [10], [36])

Drummond v HM Revenue & Customs

[2009] EWCA Civ 608 · 25 June 2009Defines

Receipt of a capital sum in return for surrender of rights constitutes a disposal for capital gains purposes. (see para [14]) For a surrender within section 22(1), the time of disposal is when the capital sum is received. (see para [14]) A capital sum means money or money’s worth not excluded from the consideration used to compute the gain. (see para [14])

What each judgment says about section 22 is in the case-law panel in the full Act.

Amendments and notes

2 notes from legislation.gov.uk

Amendments

  1. F62S. 22(4) inserted (with effect in accordance with Sch. 3 paras. 5, 7 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 3 para. 4(2) (with Sch. 3 para. 6(3))

Modifications

  1. C90S. 22 excluded (27.7.1993) by 1993 c. 37, s. 12, Sch. 2 Pt. I para.17