Taxation of Chargeable Gains Act 1992

Part 1 — Capital gains tax and corporation tax on chargeable gains

General

Holding beginning or ceasing to fall within section 490 of CTA 2009

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• (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.

Capital gains tax

Meaning of “qualifying corporate bond".

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• (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.

Restrictions on buying losses: tax avoidance schemes

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• (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.

Rates of capital gains tax

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Accumulation and discretionary settlements

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Other special cases

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Time for payment of tax

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Corporation tax

Company’s total profits to include chargeable gains

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Residence etc.

Residence, including temporary residence

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Non-resident with United Kingdom branch or agency

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Visiting forces, agents-general etc

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Foreign assets of person with foreign domicile

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Attribution of gains to members of non-resident companies

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Non-resident groups of companies

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

Chapter I — Introductory

Computation of gains

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• (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.

Computation of losses

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

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

• (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.

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (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.

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (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).

Disposals and acquisitions treated as made at market value

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• (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.

Transactions between connected persons

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• (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.

• (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.

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

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• (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.

Original market value and aggregate market value for purposes of section 19

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• (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