Taxation of Chargeable Gains Act 1992, section 37

Consideration chargeable to tax on income

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

(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.

[F111 (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).F111]

(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—

[F112 (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.F112]

[F113 See also section 37A(4) and (5) (consideration on disposal of certain leases).F113]

[F114 (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).F114]

(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.

F115 (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F116 (5)If—

(a) because section [F117 517G(4) or (6) of ITA 2007 (transactions in land: the chargeable person) applies, an amount is charged to income tax as income of F117] 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.

[F118 (5A)If—

(a) because section [F119 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 F119] 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.F118]

(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 ). F116]

Definitions used in section 37 16

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
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
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
trade

“trade” has the same meaning as in the Income Tax Acts;

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

(b) “trade”, “profession” and “vocation” have the same meaning as in the Income Tax Acts.

Defined in s.165(8) · see it in the full Act

(9) In this section and Schedule 7 and in determining whether a company is a trading company for the purposes of this section and that Schedule, the expression “trade” shall be taken to include the occupation of woodlands where the woodlands are managed by the occupier on a commercial basis and with a view to the realisation of profits.

Defined in s.165(9) · see it in the full Act
profession

(b) “trade”, “profession” and “vocation” have the same meaning as in the Income Tax Acts.

Defined in s.165(8) · see it in the full Act
vocation

(b) “trade”, “profession” and “vocation” have the same meaning as in the Income Tax Acts.

Defined in s.165(8) · see it in the full Act
property

(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

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

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

“the Capital Allowances Act” means the Capital Allowances Act 2001 ;

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

(a) is a “qualifying” corporate bond if it is issued after 13th March 1984; and

Defined in s.117(7) · see it in the full Act
lease

10 (1) In this Act, unless the context otherwise requires “lease” —

(a) in relation to land, includes an underlease, sublease or any tenancy or licence, and any agreement for a lease, underlease, sublease or tenancy or licence and, in the case of land outside the United Kingdom, any interest corresponding to a lease as so defined,

(b) in relation to any description of property other than land, means any kind of agreement or arrangement under which payments are made for the use of, or otherwise in respect of, property,

Defined in Sch.8 para.10(1) · see it in the full Act
ITTOIA 2005

“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005 ;

Defined in s.288(1) · see it in the full Act
ITA 2007

“ITA 2007” means the Income Tax Act 2007 ;

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

“land” includes messuages, tenements, and hereditaments, houses and buildings of any tenure;

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

(b) “land” includes buildings.

Defined in Sch.2 para.9(5) · see it in the full Act
CTA 2010

“CTA 2010” means the Corporation Tax Act 2010 ;

Defined in s.288(1) · 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

Cases considering section 37 8

Drummond v HM Revenue & Customs

[2009] EWCA Civ 608 · 25 June 2009Interprets

Only the computed chargeable event gain was money charged to income tax and therefore excluded from disposal consideration. Gross surrender proceeds did not become receipts used to compute the taxpayer’s income merely because they featured in an antecedent statutory calculation. (see paras [23]–[27])

HM Inspector of Taxes v Strand Options and Futures Ltd.

[2003] EWCA Civ 1457 · 22 October 2003Limits

An amount charged to income tax or taken into account in computing income was excluded when calculating a chargeable gain. The provision prevented double taxation for an individual recipient, but did not provide an equivalent exclusion for the company recipient here. (see paras [12] and [15])

Revenue and Customs v Collins

[2009] EWHC 284 (Ch) · 20 February 2009

Applies the exclusion of amounts charged to income tax or taken into account in computing income from consideration for a disposal. The court concluded that the disputed sum was not excluded, although that conclusion was irrelevant to the repayment claim (see paras [14], [47]).

What each judgment says about section 37 is in the case-law panel in the full Act.

Amendments and notes

16 notes from legislation.gov.uk

Amendments

  1. F111S. 37(1A)-(1C) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 44
  2. F112S. 37(2)(a)-(c) substituted for s. 37(2)(a)(b) (22.3.2001) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 77
  3. F113Words in s. 37(2) added (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 231 (with Sch. 9 paras. 1-9, 22)
  4. F114S. 37(2A) inserted (with effect in accordance with Sch. 12 para. 18(1) of the amending Act) by Finance Act 2013 (c. 29), Sch. 12 para. 6
  5. F115S. 37(4) repealed (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 48(2)
  6. F116S. 37(5)-(7) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 299 (with Sch. 2)
  7. F117Words in s. 37(5)(a) substituted (with effect in accordance with s. 82 of the amending Act) by Finance Act 2016 (c. 24), s. 79(8) (with savings in 2017 c. 32, s. 39(1)(2)) this amendment is subject to savings and/or transitional provisions, see the commentary.
  8. F118S. 37(5A) inserted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 228 (with Sch. 2)
  9. F119Words in s. 37(5A)(a) substituted (with effect in accordance with s. 81 of the amending Act) by Finance Act 2016 (c. 24), s. 77(7) (with savings in 2017 c. 32, s. 39(1)(2)) this amendment is subject to savings and/or transitional provisions, see the commentary.

Modifications

  1. C116S. 37 extended (27.7.1993 with effect for the year 1992-93 and subsequent years of assessment as mentioned in s. 184(3)) by 1993 c. 34, ss. 176(2)(b), 184(3)
  2. C117S. 37 excluded (19.3.1997) by Finance Act 1997 (c. 16), Sch. 12 para. 12(1)(2)(3)(4), 13, 14 (with Sch. 12 para. 17)
  3. C118S. 37 excluded (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 670(7), 1329(1) (with Sch. 2 Pts. 1, 2)
  4. C119S. 37 excluded (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 672(4), 1329(1) (with Sch. 2 Pts. 1, 2)
  5. C120S. 37(1) restricted (16.7.1992, with effect as mentioned in s. 65(6) of the amending Act) by 1992 c. 48, s. 65(2)(e)(5)
  6. C121S. 37(1) modified (22.7.2004) by Finance Act 2004 (c. 12), s. 133(5)(a)
  7. C122S. 37(1) modified (with effect in accordance with art. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 45(2)