Taxation of Chargeable Gains Act 1992

Part VIIU.K. Other property, businesses, investments etc.

Private residencesU.K.

222 Relief on disposal of private residence.U.K.

(1)This section applies to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in—

(a)a dwelling-house or part of a dwelling-house which is, or has at any time in his period of ownership been, his only or main residence, or

(b)land which he has for his own occupation and enjoyment with that residence as its garden or grounds up to the permitted area.

(2)In this section “the permitted area” means, subject to subsections (3) and (4) below, an area (inclusive of the site of the dwelling-house) of 0.5 of a hectare.

[F1(3)Where the area required for the reasonable enjoyment of the dwelling-house (or of the part in question) as a residence, having regard to the size and character of the dwelling-house, is larger than 0.5 of a hectare, that larger area shall be the permitted area.]

(4)Where part of the land occupied with a residence is and part is not within subsection (1) above, then (up to the permitted area) that part shall be taken to be within subsection (1) above which, if the remainder were separately occupied, would be the most suitable for occupation and enjoyment with the residence.

(5)So far as it is necessary for the purposes of this section to determine which of 2 or more residences is an individual’s main residence for any period—

(a)the individual may conclude that question by notice to [F2an officer of the Board] given within 2 years from the beginning of that period but subject to a right to vary that notice by a further notice to [F2an officer of the Board] as respects any period beginning not earlier than 2 years before the giving of the further notice,

F3(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)In the case of [F5an individual living with his spouse or civil partner]—

(a)there can only be one residence or main residence for both, so long as living together and, where a notice under subsection (5)(a) above affects both [F6the individual and his spouse or civil partner], it must be given by both, F7...

F8(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)In this section and sections 223 to 226, “the period of ownership” where the individual has had different interests at different times shall be taken to begin from the first acquisition taken into account in arriving at the expenditure which under Chapter III of Part II is allowable as a deduction in the computation of the gain to which this section applies, and in the case of [F9an individual living with his spouse or civil partner]—

(a)if the one disposes of, or of his or her interest in, the dwelling-house or part of a dwelling-house which is their only or main residence to the other, and in particular if it passes on death to the other as legatee, the other’s period of ownership shall begin with the beginning of the period of ownership of the one making the disposal, and

(b)if paragraph (a) above applies, but the dwelling-house or part of a dwelling-house was not the only or main residence of both throughout the period of ownership of the one making the disposal, account shall be taken of any part of that period during which it was his only or main residence as if it was also that of the other.

(8)If at any time during an individual’s period of ownership of a dwelling-house or part of a dwelling-house he—

(a)resides in living accommodation which is for him job-related F10..., and

(b)intends in due course to occupy the dwelling-house or part of a dwelling-house as his only or main residence,

this section and sections 223 to 226 shall apply as if the dwelling-house or part of a dwelling-house were at that time occupied by him as a residence.

[F11(8A)Subject to subsections (8B), (8C) and (9) below, for the purposes of subsection (8) above living accommodation is job-related for a person if—

(a)it is provided for him by reason of his employment, or for his spouse [F12or civil partner] by reason of [F13the spouse’s or civil partner's] employment, in any of the following cases—

(i)where it is necessary for the proper performance of the duties of the employment that the employee should reside in that accommodation;

(ii)where the accommodation is provided for the better performance of the duties of the employment, and it is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees;

(iii)where, there being a special threat to the employee’s security, special security arrangements are in force and the employee resides in the accommodation as part of those arrangements;

or

(b)under a contract entered into at arm’s length and requiring him or his spouse [F12or civil partner] to carry on a particular trade, profession or vocation, he or his spouse [F12or civil partner] is bound—

(i)to carry on that trade, profession or vocation on premises or other land provided by another person (whether under a tenancy or otherwise); and

(ii)to live either on those premises or on other premises provided by that other person.

(8B)If the living accommodation is provided by a company and the employee is a director of that or an associated company, subsection (8A)(a)(i) or (ii) above shall not apply unless—

(a)the company of which the employee is a director is one in which he or she has no material interest; and

(b)either—

(i)the employment is as a full-time working director, or

(ii)the company is non-profit making, that is to say, it does not carry on a trade nor do its functions consist wholly or mainly in the holding of investments or other property, or

(iii)the company is [F14a charitable company].

(8C)Subsection (8A)(b) above does not apply if the living accommodation concerned is in whole or in part provided by—

(a)a company in which the borrower or his spouse [F15or civil partner] has a material interest; or

(b)any person or persons together with whom the borrower or his spouse [F15or civil partner] carries on a trade or business in partnership.

(8D)For the purposes of this section—

(a)a company is an associated company of another if one of them has control of the other or both are under the control of the same person; and

(b)“employment”, “director”, “full-time working director”, “material interest” and “control”, in relation to a body corporate, have [F16the meanings given by Chapter 2 of Part 3 of ITEPA 2003].]

(9)[F17Subsections (8A)(b) and (8C) above] shall apply for the purposes of subsection (8) above only in relation to residence on or after 6th April 1983 in living accommodation which is job-related [F18for the purposes of that subsection].

(10)Apportionments of consideration shall be made wherever required by this section or sections 223 to 226 and, in particular, where a person disposes of a dwelling-house only part of which is his only or main residence.

223 Amount of relief.U.K.

(1)No part of a gain to which section 222 applies shall be a chargeable gain if the dwelling-house or part of a dwelling-house has been the individual’s only or main residence throughout the period of ownership, or throughout the period of ownership except for all or any part of the last 36 months of that period.

(2)Where subsection (1) above does not apply, a fraction of the gain shall not be a chargeable gain, and that fraction shall be—

(a)the length of the part or parts of the period of ownership during which the dwelling-house or the part of the dwelling-house was the individual’s only or main residence, but inclusive of the last 36 months of the period of ownership in any event, divided by

(b)the length of the period of ownership.

(3)For the purposes of subsections (1) and (2) above—

(a)a period of absence not exceeding 3 years (or periods of absence which together did not exceed 3 years), and in addition

(b)any period of absence throughout which the individual worked in an employment or office all the duties of which were performed outside the United Kingdom [F19or lived with a spouse or civil partner who worked in such an employment or office], and in addition

(c)any period of absence not exceeding 4 years (or periods of absence which together did not exceed 4 years) throughout which the individual was prevented from residing in the dwelling-house or part of the dwelling-house in consequence of the situation of his place of work or in consequence of any condition imposed by his employer requiring him to reside elsewhere, being a condition reasonably imposed to secure the effective performance by the employee of his duties, [F20and in addition,]

[F21(d)any period of absence not exceeding 4 years (or periods of absence which together did not exceed 4 years) throughout which the individual lived with a spouse or civil partner in respect of whom paragraph (c) applied in respect of that period (or periods),]

shall be treated as if in that period of absence the dwelling-house or the part of the dwelling-house was the individual’s only or main residence [F22if conditions A and B are met.]

[F23(3A)Condition A is that before the period there was a time when the dwelling-house was the individual’s only or main residence.

(3B)Condition B is that after the period—

(a)in a case falling within paragraph (a), (b), (c) or (d) of subsection (3), there was a time when the dwelling-house was the individual’s only or main residence,

(b)in a case falling within paragraph (b), (c) or (d) of that subsection, the individual was prevented from resuming residence in the dwelling-house in consequence of the situation of the individual’s place of work or a condition imposed by the terms of the individual’s employment requiring the individual to reside elsewhere, being a condition reasonably imposed to secure the effective performance by the employee of his duties, or

(c)in a case falling within paragraph (b), (c) or (d) of that subsection, the individual lived with a spouse or civil partner to whom paragraph (b) of this subsection applied.]

(4)Where a gain to which section 222 applies accrues to any individual and the dwelling-house in question or any part of it is or has at any time in his period of ownership been wholly or partly let by him as residential accommodation, the part of the gain, if any, which (apart from this subsection) would be a chargeable gain by reason of the letting, shall be such a gain only to the extent, if any, to which it exceeds whichever is the lesser of—

(a)the part of the gain which is not a chargeable gain by virtue of the provisions of subsection (1) to (3) above F24... ; and

(b)£40,000.

(5)Where at any time the number of months specified in subsections (1) and (2)(a) above is 36, the Treasury may by order amend those subsections by substituting references to 24 for the references to 36 in relation to disposals on or after such date as is specified in the order.

(6)Subsection (5) above shall also have effect as if 36 (in both places) read 24 and as if 24 read 36.

(7)In this section—

• “period of absence” means a period during which the dwelling-house or the part of the dwelling-house was not the individual’s only or main residence and throughout which he had no residence or main residence eligible for relief under this section; and

• “period of ownership” does not include any period before 31st March 1982.

[F25(8)This section is subject to—

(a)section 224 (amount of relief: further provisions),

[F26(aa)section 225D (private residence of adult placement carer),] and

(b)section 226A (private residence relief: cases where relief obtained under section 260).]

224 Amount of relief: further provisions.U.K.

(1)If the gain [F27accrues on] the disposal of a dwelling-house or part of a dwelling-house part of which is used exclusively for the purpose of a trade or business, or of a profession or vocation, the gain shall be apportioned and section 223 shall apply in relation to the part of the gain apportioned to the part which is not exclusively used for those purposes.

(2)If at any time in the period of ownership there is a change in what is occupied as the individual’s residence, whether on account of a reconstruction or conversion of a building or for any other reason, or there have been changes as regards the use of part of the dwelling-house for the purpose of a trade or business, or of a profession or vocation, or for any other purpose, the relief given by section 223 [F28may be adjusted in a manner which is just and reasonable].

(3)Section 223 shall not apply in relation to a gain if the acquisition of, or of the interest in, the dwelling-house or the part of a dwelling-house was made wholly or partly for the purpose of realising a gain from the disposal of it, and shall not apply in relation to a gain so far as attributable to any expenditure which was incurred after the beginning of the period of ownership and was incurred wholly or partly for the purpose of realising a gain from the disposal.

[F29(4)This section is subject to section 225D (private residence of adult placement carer).]

225 Private residence occupied under terms of settlement.U.K.

Sections 222 to 224 shall also apply in relation to a gain accruing to [F30the trustees of a settlement] on a disposal of settled property being an asset within section 222(1) where, during the period of ownership of [F31the trustees], the dwelling-house or part of the dwelling-house mentioned in that subsection has been the only or main residence of a person entitled to occupy it under the terms of the settlement, and in those sections as so applied—

(a)references to the individual shall be taken as references to [F32the trustees] except in relation to the occupation of the dwelling-house or part of the dwelling-house, and

(b)the notice which may be given to [F33an officer of the Board] under section 222(5)(a) shall be a joint notice by [F34the trustees] and the person entitled to occupy the dwelling-house or part of the dwelling-house[F35; but section 223 (as so applied) shall apply only on the making of a claim by the trustees.]

[F36225APrivate residence held by personal representativesU.K.

(1)Sections 222 to 224 shall also apply in relation to a gain accruing to the personal representatives of a deceased person on a disposal of an asset within section 222 (1) if the following conditions are satisfied.

(2)The first condition is that, immediately before and immediately after the death of the deceased person, the dwelling-house or part of the dwelling-house mentioned in section 222 (1) was the only or main residence of one or more individuals.

(3)The second condition is that—

(a)that individual or one of those individuals has a relevant entitlement, or two or more of those individuals have relevant entitlements, and

(b)the relevant entitlement accounts for, or the relevant entitlements together account for, 75% or more of the net proceeds of disposal;

and for this purpose “relevant entitlement” means an entitlement as legatee of the deceased person to, or to an interest in possession in, the whole or any part of the net proceeds of disposal.

(4)In subsection (3) above “net proceeds of disposal” means—

(a)the proceeds of the disposal of the asset realised by the personal representatives, less

(b)any incidental costs allowable as a deduction in accordance with section 38(1)(c) in computing the gain accruing to the personal representatives on that disposal,

but on the assumption that none of the proceeds is required to meet the liabilities of the deceased person’s estate (including any liability to inheritance tax).

(5)In sections 222 to 224 as applied by this section—

(a)references to the individual shall be taken as references to the personal representatives except in relation to the occupation of the dwelling-house or part of the dwelling-house, and

(b)the notice which may be given to an officer of the Board under section 222(5)(a) shall be a joint notice by the personal representatives and the individual or individuals entitled to occupy the dwelling-house or part of the dwelling-house.

(6)But section 223 (as so applied) shall apply only on the making of a claim by the personal representatives.]

[F37225BDisposals in connection with divorce, etcU.K.

(1)Where an individual—

(a)ceases to live with his spouse or civil partner in a dwelling-house or part of a dwelling-house which is their only or main residence, and

(b)subsequently disposes of, or of an interest in, the dwelling-house or part to the spouse or civil partner,

then, if conditions A to C are met, sections 222 to 224 shall apply as if the dwelling-house or part continued to be the individual’s only or main residence until the disposal.

(2)Condition A is that the disposal mentioned in subsection (1)(b) is pursuant to—

(a)an agreement between the individual and his spouse or civil partner made in contemplation of or otherwise in connection with the dissolution or annulment of the marriage or civil partnership, their judicial separation or the making of a separation order in respect of them, or their separation in other circumstances such that the separation is likely to be permanent, or

(b)an order of a court—

(i)made on granting an order or a decree of divorce or nullity of marriage, for the dissolution or annulment of the civil partnership, or for judicial separation,

(ii)made in connection with the dissolution or annulment of the marriage or civil partnership or the parties’ judicial separation and which is made at any time after the granting of such an order or decree,

(iii)made at any time under section 22A, 23, 23A, 24 or 24A of the Matrimonial Causes Act 1973,

(iv)made at any time under article 25 or 26 of the Matrimonial Causes (Northern Ireland) Order 1978,

(v)made under section 8 of the Family Law (Scotland) Act 1985, including incidental orders made by virtue of section 14 of that Act, or

(vi)made at any time under any provision of Schedule 5 to the Civil Partnership Act 2004 that corresponds to any of the provisions mentioned in paragraphs (iii) and (iv).

(3)Condition B is that in the period between the individual ceasing to reside in the dwelling-house or part of the dwelling-house and the disposal to the spouse or civil partner, the dwelling-house or part continues to be the only or main residence of the spouse or civil partner.

(4)Condition C is that the individual has not given notice under section 222(5) that another dwelling-house or part of a dwelling-house is to be treated as the individual’s main residence for any part of that period.

(5)Section 223 (as applied by this section) shall apply only on the making of a claim by the individual.]

[F38225CSale of private residence under certain agreements with employer, etcU.K.

(1)This section applies where—

(a)an individual disposes of, or of an interest in, a dwelling-house or a part of a dwelling-house which is the individual’s only or main residence (“the initial disposal”),

(b)the individual does so as a consequence of a change to the situation of the individual’s place of work or that of a co-owner of the dwelling-house or the interest, being a change that is required by the employer of the individual or the co-owner, and

(c)the initial disposal is under a home purchase agreement.

(2)If—

(a)under the terms of the agreement the individual receives, within three years of the initial disposal, a share of any profit made by the purchaser upon the purchaser’s disposal of, or of an interest in, the dwelling-house or part of the dwelling-house, and

(b)the receipt of that sum would be treated (apart from this section) as a disposal falling within section 22 (disposal where capital sums derived from assets),

that receipt shall be treated for the purposes of this Act as a gain attributable to the initial disposal but accruing to the individual at the time the sum is received.

(3)In this section—

• “home purchase agreement” means an agreement—

  (a)

  made with the employer or a person operating under an agreement with the employer (“the purchaser”),

  (b)

  which includes a term entitling the individual to receive a share of any such profit as is mentioned in subsection (2)(a);

• “co-owner”, in relation to any individual (“A”), means another individual who holds an interest jointly or in common with A, whether or not the interests of the co-owners are equal.]

[F39225DPrivate residence of adult placement carerU.K.

(1)This section applies where a gain to which section 222 applies accrues to an individual (“A”) and, at any time during A's period of ownership, part of the dwelling-house was occupied by another person (“B”)—

(a)in England and Wales, pursuant to an adult placement scheme,

(b)in Scotland, pursuant to arrangements which constitute or form part of an adult placement service involving the provision of accommodation for B, or

(c)in Northern Ireland, pursuant to arrangements made with an adult placement agency for the provision of accommodation for B.

(2)For the purposes of this Part, in determining the periods during which the dwelling-house, or any part of the dwelling-house, was A's only or main residence, B's occupation of part of the dwelling-house pursuant to the scheme or arrangement is to be disregarded.

(3)For the purposes of section 224, the occupation of the part of the dwelling-house by B pursuant to the scheme or arrangement does not amount to the use of that part of the dwelling-house by A exclusively for the purpose of a trade, business, profession or vocation.

(4)In this section—

• “adult placement agency” means an organisation or undertaking—

  (a)

  that arranges for the provision of care and support (including accommodation) for persons in need, and

  (b)

  in respect of which a requirement to register arises under Article 12 of the Health and Personal Social Services (Quality, Improvement and Regulation) (Northern Ireland) Order 2003,

• “adult placement scheme” means a scheme—

  (a)

  under which an individual agrees with the person carrying on the scheme to provide care and support (including accommodation) to an adult who is in need of it, and

  (b)

  in respect of which a requirement to register arises under section 11 of the Care Standards Act 2000, and

• “adult placement service” has the meaning given by paragraph 11 of schedule 12 to the Public Services Reform (Scotland) Act 2010.]

226 Private residence occupied by dependent relative before 6th April 1988.U.K.

(1)Subject to subsection (3) below, this section applies to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in, a dwelling-house or part of a dwelling-house which, on 5th April 1988 or at any earlier time in his period of ownership, was the sole residence of a dependent relative of the individual, provided rent-free and without any other consideration.

(2)If the individual so claims, such relief shall be given in respect of it and its garden or grounds as would be given under sections 222 to 224 if the dwelling-house (or part of the dwelling-house) had been the individual’s only or main residence in the period of residence by the dependent relative, and shall be so given in addition to any relief available under those sections apart from this section.

(3)If in a case within subsection (1) above the dwelling-house or part ceases, whether before 6th April 1988 or later, to be the sole residence (provided as mentioned above) of the dependent relative, any subsequent period of residence beginning on or after that date by that or any other dependent relative shall be disregarded for the purposes of subsection (2) above.

(4)Not more than one dwelling-house (or part of a dwelling-house) may qualify for relief as being the residence of a dependent relative of the claimant at any one time nor, in the case of [F40an individual and his spouse or civil partner living with him], as being the residence of a dependent relative of the claimant or of the claimant’s [F41spouse or civil partner] at any one time.

F42(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)In this section “dependent relative” means, in relation to an individual—

(a)any relative of his or of his wife who is incapacitated by old age or infirmity from maintaining himself, or

(b)his or his wife’s mother who, whether or not incapacitated, is either widowed, or living apart from her husband, or a single woman in consequence of dissolution or annulment of marriage.

(7)If the individual mentioned in subsection (6) above is a woman the references in that subsection to the individual’s wife shall be construed as references to the individual’s husband.

[F43226APrivate residence relief: cases where relief obtained under section 260U.K.

(1)This section applies where—

(a)section 223 applies, or would apart from this section apply, in relation to a gain or part of a gain accruing to an individual or the trustees of a settlement (“the transferor”) on a disposal (the “later disposal”),

(b)in computing the chargeable gain which would, apart from section 223, accrue to the transferor on the later disposal, the allowable expenditure would fall to be reduced, and

(c)that reduction would to any extent fall to be made in consequence, directly or indirectly, of a claim or claims under section 260 in respect of one or more earlier disposals (whether or not made to the transferor).

(2)If a claim for relief under section 260 in respect of—

(a)the earlier disposal, or

(b)if there were two or more such disposals, any of them,

is made on or before the making of the later disposal, section 223 shall not apply in relation to the gain or part of a gain accruing on the later disposal.

(3)If a claim for relief under section 260 in respect of—

(a)the earlier disposal, or

(b)if there were two or more such disposals, any of them,

is made after the making of the later disposal and subsection (2) above does not apply, it is to be assumed for the purposes of capital gains tax that section 223 never applied in relation to the gain or part of a gain accruing on the later disposal.

(4)All such adjustments shall be made, whether by discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to subsection (3) above (notwithstanding any limitation on the time within which any adjustment may be made).

(5)Where the later disposal is made by the trustees of a settlement, the references in subsections (2) and (3) above to the making of the later disposal shall be read as references to the making of a claim for relief under section 223 in respect of the gain or part of a gain accruing on that disposal.

(6)If a claim for relief under section 260 in respect of an earlier disposal is revoked, this section shall apply as if the claim had never been made.

(7)This section is subject to section 226B (exception for maintenance funds for historic buildings).

226BException to section 226AU.K.

(1)Section 226A shall not apply in relation to a later disposal made by the trustees of a settlement if the trustees have elected that section [F44508 of ITA 2007 (trustees’ election in respect of income arising from heritage maintenance property)] shall have effect in the case of—

(a)the settlement, or

(b)any part of the settlement,

in relation to each year of assessment in which a relevant earlier disposal is made.

(2)In this section “relevant earlier disposal”, in relation to a later disposal, means an earlier disposal in respect of which a claim mentioned in section 226A(1)(c) is made.

(3)This section is to be construed as one with section 226A.]

Employee share ownership trustsU.K.

227 Conditions for roll-over relief.U.K.

(1)Relief is available under section 229(1) where each of the 6 conditions set out in subsections (2) to (7) below is fulfilled.

(2)The first condition is that a person (“the claimant”) makes a disposal of shares, or his interest in shares, to [F45the trustees of a settlement] which—

(a)is a qualifying employee share ownership trust at the time of the disposal, and

(b)was established by a company (“the founding company”) which immediately after the disposal is a trading company or the holding company of a trading group.

(3)The second condition is that the shares—

(a)are shares in the founding company,

(b)form part of the ordinary share capital of the company,

(c)are fully paid up,

(d)are not redeemable, and

(e)are not subject to any restrictions other than restrictions which attach to all shares of the same class or a restriction authorised by paragraph 7(2) of Schedule 5 to the M1Finance Act 1989.

(4)The third condition is that, at any time in the entitlement period, the trustees—

(a)are beneficially entitled to not less than 10 per cent. of the ordinary share capital of the founding company,

(b)are beneficially entitled to not less than 10 per cent. of any profits available for distribution to equity holders of the founding company, and

(c)would be beneficially entitled to not less than 10 per cent. of any assets of the founding company available for distribution to its equity holders on a winding-up.

(5)The fourth condition is that the claimant obtains consideration for the disposal and, at any time in the acquisition period, all the amount or value of the consideration is applied by him in making an acquisition of assets or an interest in assets (“replacement assets”) which—

(a)are, immediately after the time of the acquisition, chargeable assets in relation to the claimant, and

(b)are not shares in, or debentures issued by, the founding company or a company which is (at the time of the acquisition) in the same group as the founding company;

but the preceding provisions of this subsection shall have effect without the words “, at any time in the acquisition period," if the acquisition is made pursuant to an unconditional contract entered into in the acquisition period.

(6)The fifth condition is that, at all times in the proscribed period, there are no unauthorised arrangements under which the claimant or a person connected with him may be entitled to acquire any of the shares, or an interest in or right deriving from any of the shares, which are the subject of the disposal by the claimant.

(7)The sixth condition is that no chargeable event occurs in relation to the trustees in—

(a)the chargeable period in which the claimant makes the disposal,

(b)the chargeable period in which the claimant makes the acquisition, or

(c)any chargeable period falling after that mentioned in paragraph (a) above and before that mentioned in paragraph (b) above.

228 Conditions for relief: supplementary.U.K.

(1)This section applies for the purposes of section 227.

(2)The entitlement period is the period beginning with the disposal and ending on the expiry of 12 months beginning with the date of the disposal.

(3)The acquisition period is the period beginning with the disposal and ending on the expiry of 6 months beginning with—

(a)the date of the disposal, or

(b)if later, the date on which the third condition (set out in section 227(4)) first becomes fulfilled.

(4)The proscribed period is the period beginning with the disposal, and ending on—

(a)the date of the acquisition, or

(b)if later, the date on which the third condition (set out in section 227(4)) first becomes fulfilled.

(5)All arrangements are unauthorised unless—

(a)they arise wholly from a restriction authorised by paragraph 7(2) of Schedule 5 to the M2Finance Act 1989, or

(b)they only allow one or both of the following as regards shares, interests or rights, namely, acquisition by [F46a beneficiary under the settlement] and appropriation under an approved profit sharing scheme.

(6)An asset is a chargeable asset in relation to the claimant at a particular time if, were the asset to be disposed of at that time, any gain accruing to him on the disposal would be a chargeable gain, and either—

(a)at that time he is resident or ordinarily resident in the United Kingdom, or

(b)he would be chargeable to capital gains tax under section 10(1) in respect of the gain, or it would form part of his chargeable profits for corporation tax purposes by virtue of section [F4710B],

unless (were he to dispose of the asset at that time) the claimant would fall to be regarded for the purposes of any double taxation relief arrangements as not liable in the United Kingdom to tax on any gains accruing to him on the disposal.

(7)The question [F48whether a settlement is] at a particular time a qualifying employee share ownership trust shall be determined in accordance with Schedule 5 to the M3Finance Act 1989; and “chargeable event” in relation to trustees has the meaning given by section 69 of that Act.

(8)The expressions “holding company”, “trading company” and “trading group” have the [F49same meaning as in section 165 (see section 165A)]; and “group" (except in the expression “trading group") shall be construed in accordance with section 170.

(9)“Ordinary share capital” in relation to the founding company means all the issued share capital (by whatever name called) of the company, other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the company.

[F50(10)Chapter 6 of Part 5 of CTA 2010 (group relief: equity holders and profits or assets available for distribution) applies for the purposes of section 227(4) as if—

(a)the trustees were a company, and

(b)references to section 151(4)(a) and (b) of that Act were references to section 227(4) above.]

229 The relief.U.K.

(1)In a case where relief is available under this subsection the claimant shall, on making a claim in the period of 2 years beginning with the acquisition, be treated for the purposes of this Act—

(a)as if the consideration for the disposal were (if otherwise of a greater amount or value) 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 or value of the consideration for the acquisition were reduced by the excess of the amount or value of the actual consideration for the disposal over the amount of the consideration which the claimant is treated as receiving under paragraph (a) above.

(2)Relief is available under subsection (3) below where—

(a)relief would be available under subsection (1) above but for the fact that part only of the amount or value mentioned in section 227(5) is applied as there mentioned, and

(b)all the amount or value so mentioned except for a part which is less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal is so applied.

(3)In a case where relief is available under this subsection the claimant shall, on making a claim in the period of 2 years beginning with the acquisition, be treated for the purposes of this Act—

(a)as if the amount of the gain accruing on the disposal were reduced to the amount of the part mentioned in subsection (2)(b) above, and

(b)as if the amount or value of the consideration for the acquisition were reduced by the amount by which the gain is reduced under paragraph (a) above.

(4)Nothing in subsection (1) or (3) above shall affect the treatment for the purposes of this Act of the other party to the disposal or of the other party to the acquisition.

(5)The provisions of this Act fixing the amount of the consideration deemed to be given for a disposal or acquisition shall be applied before the preceding provisions of this section are applied.

230 Dwelling-houses: special provision.U.K.

(1)Subsection (2) below applies where—

(a)a claim is made under section 229,

(b)immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, any replacement asset was a chargeable asset in relation to the claimant,

(c)the asset is a dwelling-house or part of a dwelling-house or land, and

(d)there was a time in the period beginning with the acquisition and ending with the time when section 229(1) or (3) falls to be applied such that, if the asset (or an interest in it) were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant’s spouse [F51or civil partner].

(2)In such a case the asset shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant.

(3)Subsection (4) below applies where—

(a)the provisions of section 229(1) or (3) have been applied,

(b)any replacement asset which, immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, was a chargeable asset in relation to the claimant consists of a dwelling-house or part of a dwelling-house or land, and

(c)there is a time after section 229(1) or (3) has been applied such that, if the asset (or an interest in it) were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant’s spouse [F52or civil partner].

(4)In such a case—

(a)the asset shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant and adjustments shall be made accordingly, but

(b)any gain treated as accruing in consequence of the application of paragraph (a) above shall be treated as accruing at the time mentioned in subsection (3)(c) above or, if there is more than one such time, at the earliest of them.

(5)Subsection (6) below applies where—

(a)a claim is made under section 229,

(b)immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, any replacement asset was a chargeable asset in relation to the claimant,

(c)the asset was an option to acquire (or to acquire an interest in) a dwelling-house or part of a dwelling-house or land,

(d)the option has been exercised, and

(e)there was a time in the period beginning with the exercise of the option and ending with the time when section 229(1) or (3) falls to be applied such that, if the asset acquired on exercise of the option were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant’s spouse [F53or civil partner].

(6)In such a case the option shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant.

(7)Subsection (8) below applies where—

(a)the provisions of section 229(1) or (3) have been applied,

(b)any replacement asset which, immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, was a chargeable asset in relation to the claimant consisted of an option to acquire (or to acquire an interest in) a dwelling-house or part of a dwelling-house or land,

(c)the option has been exercised, and

(d)there is a time after section 229(1) or (3) has been applied such that, if the asset acquired on exercise of the option were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant’s spouse [F54or civil partner].

(8)In such a case—

(a)the option shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant and adjustments shall be made accordingly, but

(b)any gain treated as accruing in consequence of the application of paragraph (a) above shall be treated as accruing at the time mentioned in subsection (7)(d) above or, if there is more than one such time, at the earliest of them.

(9)References in this section to an individual include references to a person entitled to occupy under the terms of a settlement.

231 Shares: special provision.U.K.

(1)Subsection (2) below applies where—

(a)a claim is made under section 229,

(b)immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, any replacement asset was a chargeable asset in relation to the claimant,

(c)the asset consists of shares, and

(d)in the period beginning with the acquisition and ending when section 229(1) or (3) falls to be applied relief is claimed under Chapter III of Part VII of the Taxes Act [F55or Part 5 of ITA 2007] F56... in respect of the asset.

(2)In such a case the asset shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant.

(3)Subsection (4) below applies where—

(a)the provisions of section 229(1) or (3) have been applied,

(b)any replacement asset which, immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, was a chargeable asset in relation to the claimant consists of shares, and

(c)after section 229(1) or (3) has been applied relief is claimed under Chapter III of Part VII of the Taxes Act [F57or Part 5 of ITA 2007] in respect of the asset.

(4)In such a case the asset shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant and adjustments shall be made accordingly.

(5)Subsection (4) above shall also apply where section 33(1) or (3) of the M4Finance Act 1990 has applied and the claimant acquired the replacement asset in a chargeable period beginning before 6th April 1992.

232 Chargeable event when replacement assets owned.U.K.

(1)Subsection (3) below applies where—

(a)the provisions of section 229(1) or (3) are applied,

(b)a chargeable event occurs in relation to the trustees on or after the date on which the disposal is made (and whether the event occurs before or after the provisions are applied),

(c)the claimant was neither an individual who died before the chargeable event occurs nor trustees of a settlement which ceased to exist before the chargeable event occurs, and

(d)the condition set out below is fulfilled.

(2)The condition is that, at the time the chargeable event occurs, the claimant or a person then connected with him is beneficially entitled to all the replacement assets.

(3)In a case where this subsection applies, the claimant or connected person (as the case may be) shall be deemed for all purposes of this Act—

(a)to have disposed of all the replacement assets immediately before the time when the chargeable event occurs, and

(b)immediately to have reacquired them,

at the relevant value.

(4)The relevant value is such value as secures on the deemed disposal a chargeable gain equal to—

(a)the amount by which the amount or value of the consideration mentioned in section 229(1)(b) was treated as reduced by virtue of that provision (where it applied), or

(b)the amount by which the amount or value of the consideration mentioned in section 229(3)(b) was treated as reduced by virtue of that provision (where it applied).

(5)In a case where subsection (3) above would apply if “all" read “any of" in subsection (2) above, subsection (3) shall nevertheless apply, but as if—

(a)in subsection (3)(a) “all the replacement assets" read “ the replacement assets concerned ”, and

(b)the relevant value were reduced to whatever value is just and reasonable.

(6)Subsection (7) below applies where—

(a)subsection (3) above applies (whether or not by virtue of subsection (5) above), and

(b)before the time when the chargeable event occurs anything has happened as regards any of the replacement assets such that it can be said that a charge has accrued in respect of any of the gain carried forward by virtue of section 229(1) or (3).

(7)If in such a case it is just and reasonable for subsection (3) above to apply as follows, it shall apply as if—

(a)the relevant value were reduced (or further reduced) to whatever value is just and reasonable, or

(b)the relevant value were such value as secures that on the deemed disposal neither a gain nor a loss accrues (if that is just and reasonable);

but paragraph (a) above shall not apply so as to reduce the relevant value below that mentioned in paragraph (b) above.

(8)For the purposes of subsection (6)(b) above the gain carried forward by virtue of section 229(1) or (3) is the gain represented by the amount which by virtue of either of those provisions falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of replacement assets (that is, the amount found under subsection (4)(a) or (b) above, as the case may be).

(9)In this section “chargeable event” in relation to trustees has the meaning given by section 69 of the M5Finance Act 1989.

233 Chargeable event when replacement property owned.U.K.

(1)Subsection (3) below applies where—

(a)paragraphs (a) to (c) of section 232(1) are fulfilled, and

(b)the condition set out below is fulfilled.

(2)The condition is that—

(a)before the time when the chargeable event occurs, all the gain carried forward by virtue of section 229(1) or (3) was in turn carried forward from all the replacement assets to other property on a replacement of business assets, and

(b)at the time the chargeable event occurs, the claimant or a person then connected with him is beneficially entitled to all the property.

(3)In a case where this subsection applies, the claimant or connected person (as the case may be) shall be deemed for all purposes of this Act—

(a)to have disposed of all the property immediately before the time when the chargeable event occurs, and

(b)immediately to have reacquired it,

at the relevant value.

(4)The relevant value is such value as secures on the deemed disposal a chargeable gain equal to—

(a)the amount by which the amount or value of the consideration mentioned in section 229(1)(b) was treated as reduced by virtue of that provision (where it applied), or

(b)the amount by which the amount or value of the consideration mentioned in section 229(3)(b) was treated as reduced by virtue of that provision (where it applied).

(5)In a case where subsection (3) above would apply if “all the" in subsection (2) above (in one or more places) read “any of the", subsection (3) shall nevertheless apply, but as if—

(a)in subsection (3)(a) “all the property" read “ the property concerned ”, and

(b)the relevant value were reduced to whatever value is just and reasonable.

(6)Subsection (7) below applies where—

(a)subsection (3) above applies (whether or not by virtue of subsection (5) above), and

(b)before the time when the chargeable event occurs anything has happened as regards any of the replacement assets, or any other property, such that it can be said that a charge has accrued in respect of any of the gain carried forward by virtue of section 229(1) or (3).

(7)If in such a case it is just and reasonable for subsection (3) above to apply as follows, it shall apply as if—

(a)the relevant value were reduced (or further reduced) to whatever value is just and reasonable, or

(b)the relevant value were such value as secures that on the deemed disposal neither a gain nor a loss accrues (if that is just and reasonable);

but paragraph (a) above shall not apply so as to reduce the relevant value below that mentioned in paragraph (b) above.

(8)For the purposes of subsections (2) and (6)(b) above the gain carried forward by virtue of section 229(1) or (3) is the gain represented by the amount which by virtue of either of those provisions falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of replacement assets (that is, the amount found under subsection (4)(a) or (b) above, as the case may be).

(9)For the purposes of subsection (2) above a gain is carried forward from assets to other property on a replacement of business assets if, by one or more claims under sections 152 to 158, the chargeable gain accruing on a disposal of the assets is reduced, and as a result an amount falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of the other property.

234 Chargeable events when bonds owned.U.K.

(1)Subsection (3) below applies where—

(a)paragraphs (a) to (c) of section 232(1) are fulfilled, and

(b)the condition set out below is fulfilled.

(2)The condition is that—

(a)all the replacement assets were shares (new shares) in a company or companies,

(b)there has been a transaction to which section 116(10) applies and as regards which all the new shares constitute the old asset and qualifying corporate bonds constitute the new asset, and

(c)at the time the chargeable event occurs, the claimant or a person then connected with him is beneficially entitled to all the bonds.

(3)In a case where this subsection applies, a chargeable gain shall be deemed to have accrued to the claimant or connected person (as the case may be); and the gain shall be deemed to have accrued immediately before the time when the chargeable event occurs and to be of an amount equal to the relevant amount.

(4)The relevant amount is an amount equal to the lesser of—

(a)the first amount, and

(b)the second amount.

(5)The first amount is—

(a)the amount of the chargeable gain that would be deemed to accrue under 116(10)(b) if there were a disposal of all the bonds at the time the chargeable event occurs, or

(b)nil, if an allowable loss would be so deemed to accrue if there were such a disposal.

(6)The second amount is an amount equal to—

(a)the amount by which the amount or value of the consideration mentioned in section 229(1)(b) was treated as reduced by virtue of that provision (where it applied), or

(b)the amount by which the amount or value of the consideration mentioned in section 229(3)(b) was treated as reduced by virtue of that provision (where it applied).

(7)In a case where subsection (3) above would apply if “all the" in subsection (2) above (in one or more places) read “ any of the ”, subsection (3) shall nevertheless apply, but as if—

(a)in subsection (5) above “all the bonds" read “ the bonds concerned ”,

(b)the second amount were reduced to whatever amount is just and reasonable, and

(c)the relevant amount were reduced accordingly.

(8)Subsection (9) below applies where—

(a)subsection (3) above applies (whether or not by virtue of subsection (7) above), and

(b)before the time when the chargeable event occurs anything has happened as regards any of the new shares, or any of the bonds, such that it can be said that a charge has accrued in respect of any of the gain carried forward by virtue of section 229(1) or (3).

(9)If in such a case it is just and reasonable for subsection (3) above to apply as follows, it shall apply as if—

(a)the second amount were reduced (or further reduced) to whatever amount is just and reasonable, and

(b)the relevant amount were reduced (or further reduced) accordingly (if the second amount is less than the first amount),

but nothing in this subsection shall have the effect of reducing the second amount below nil.

(10)For the purposes of subsection (8)(b) above the gain carried forward by virtue of section 229(1) or (3) is the gain represented by the amount which by virtue of either of those provisions falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of replacement assets (that is, the amount found under subsection (6)(a) or (b) above, as the case may be).

F58235 Information.U.K.

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

236 Prevention of double charge.U.K.

(1)Where a charge can be said to accrue by virtue of section 232 or 233 in respect of any of the gain carried forward by virtue of section 229(1) or (3), so much of the gain charged shall not be capable of being carried forward (from assets to other property or from property to other property) under sections 152 to 158 on a replacement of business assets.

(2)For the purpose of construing subsection (1) above—

(a)what of the gain has been charged shall be found in accordance with what is just and reasonable;

(b)section 233(8) and (9) shall apply.

(3)In a case where—

(a)section 234 applies in the case of bonds,

(b)subsequently a disposal of the bonds occurs as mentioned in section 116(10)(b), and

(c)a chargeable gain is deemed to accrue under section 116(10)(b),

the chargeable gain shall be reduced by the relevant amount found under section 234 or (if the amount exceeds the gain) shall be reduced to nil.

(4)The relevant amount shall be apportioned where the subsequent disposal is of some of the bonds mentioned in subsection (3)(a) above; and subsection (3) shall apply accordingly.

[F59[F60Share incentive] plansU.K.

236ARelief for transfers to [F61share incentive] plansU.K.

Schedule 7C (which makes provision for roll-over relief where shares are transferred to an approved [F61share incentive] plan) shall have effect.]

Superannuation funds, profit sharing schemes, employee trusts etc.U.K.

237 Superannuation funds, annuities and annual payments.U.K.

No chargeable gain shall accrue to any person on the disposal of a right to, or to any part of—

(a)any allowance, annuity or capital sum payable out of any superannuation fund, or under any superannuation scheme, established solely or mainly for persons employed in a profession, trade, undertaking or employment, and their dependants, [F62or]

F63(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)annual payments which are due under a covenant made by any person and which are not secured on any property.

[F64237A Share option schemes: release and replacement of options.U.K.

(1)This section applies in any case where a right to acquire shares in a body corporate (“the old right”) which was obtained by an individual by reason of his office or employment as a director or employee of that or any other body corporate is released in whole or in part for a consideration which consists of or includes the grant to that individual of another right (“the new right”) to acquire shares in that or any other body corporate.

(2)As respects the person to whom the new right is granted—

(a)without prejudice to subsection (1) above, the new right shall not be regarded for the purposes of capital gains tax as consideration for the release of the old right;

(b)the amount or value of the consideration given by him or on his behalf for the acquisition of the new right shall be taken for the purposes of section 38(1) to be the amount or value of the consideration given by him or on his behalf for the old right; and

(c)any consideration paid for the acquisition of the new right shall be taken to be expenditure falling within section 38(1)(b).

(3)As respects the grantor of the new right, in determining for the purposes of this Act the amount or value of the consideration received for the new right, the release of the old right shall be disregarded.]

238 Approved profit sharing and share option schemes.U.K.

(1)Notwithstanding anything in a profit sharing scheme approved under Schedule 9 of the Taxes Act or in paragraph 2(2) of that Schedule or in the trust instrument relating to that scheme, for the purposes of capital gains tax a person who is a participant in relation to that scheme shall be treated as absolutely entitled to his shares as against the trustees of the scheme.

(2)For the purposes of capital gains tax—

(a)no deduction shall be made from the consideration for the disposal of any shares by reason only that an amount determined under section 186 or 187 of or Schedule 9 or 10 to the Taxes Act [F65counts as employment income (or was chargeable to income tax for the year 2002-03 or an earlier year of assessment] under section 186(3) or (4) of that Act;

(b)any charge to income tax by virtue of section 186(3) of that Act shall be disregarded in determining whether a distribution is a capital distribution within the meaning of section 122(5)(b);

(c)nothing in any provision of section 186 or 187 of or Schedule 9 or 10 to that Act with respect to—

(i)the order in which any of a participant’s shares are to be treated as disposed of for the purposes of those provisions as they have effect in relation to profit sharing schemes, or

(ii)the shares in relation to which an event is to be treated as occurring for any such purpose,

shall affect the rules applicable to the computation of a gain accruing on a part disposal of a holding of shares or other securities which were acquired at different times; and

(d)a gain accruing on an appropriation of shares to which section 186(11) of that Act applies shall not be a chargeable gain.

(3)In this section “participant” and “the trust instrument” have the meanings given by section 187 of the Taxes Act.

F66(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F67238AApproved share schemes and share incentivesU.K.

(1)Schedule 7D (approved share schemes and share incentives) shall have effect.

(2)Schedule 7D relates—

(a)in Part 1, to approved share incentive plans (SIPs) (see section 488 of ITEPA 2003),

(b)in Part 2, to approved SAYE option schemes (see section 516 of that Act),

(c)in Part 3, to approved CSOP schemes (CSOPs) (see section 521 of that Act), and

(d)in Part 4, to enterprise management incentives (see section 527 of that Act).]

239[F68Disposals to trustees of employee trusts]U.K.

(1)Where—

(a)a close company disposes of an asset to trustees in circumstances such that the disposal is a disposition which by virtue of section 13 of the M6Inheritance Tax Act 1984 (employee trusts) is not a transfer of value for the purposes of inheritance tax, or

(b)an individual disposes of an asset to trustees in circumstances such that the disposal is an exempt transfer by virtue of section 28 of that Act (employee trusts: inheritance tax),

this Act shall have effect in relation to the disposal in accordance with subsections (2) and (3) below.

(2)Section 17(1) shall not apply to the disposal; and if the disposal is by way of gift or is for a consideration not exceeding the sums allowable as a deduction under section 38—

(a)the disposal, and the acquisition by the trustees, shall be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal, and

(b)where the trustees dispose of the asset, its acquisition by the company or individual shall be treated as its acquisition by the trustees.

Paragraph (b) above also applies where section 149(1) of the 1979 Act applied on the disposal of an asset to trustees who have not disposed of it before the coming into force of this section.

(3)Where the disposal is by a close company, section 125(1) shall apply to the disposal as if for the reference to market value there were substituted a reference to market value or the sums allowable as a deduction under section 38, whichever is the less.

(4)Subject to subsection (5) below, this Act shall also have effect in accordance with subsection (2) above in relation to any disposal made by a company other than a close company if—

(a)the disposal is made to trustees otherwise than under a bargain made at arm’s length, and

(b)the property disposed of is to be held by them on trusts of the description specified in section 86(1) of the M7Inheritance Tax Act 1984 (that is to say, those in relation to which the said section 13 of that Act has effect) and the persons for whose benefit the trusts permit the property to be applied include all or most of either—

(i)the persons employed by or holding office with the company, or

(ii)the persons employed by or holding office with the company or any one or more subsidiaries of the company.

(5)Subsection (4) above does not apply if the trusts permit any of the property to be applied at any time (whether during any such period as is referred to in the said section 86(1) or later) for the benefit of—

(a)a person who is a participator in the company (“the donor company”), or

(b)any other person who is a participator in any other company that has made a disposal of property to be held on the same trusts as the property disposed of by the donor company, being a disposal in relation to which this Act has had effect in accordance with subsection (2) above, or

(c)any other person who has been a participator in the donor company or any such company as is mentioned in paragraph (b) above at any time after, or during the 10 years before, the disposal made by that company, or

(d)any person who is connected with a person within paragraph (a), (b) or (c) above.

(6)The participators in a company who are referred to in subsection (5) above do not include any participator who—

(a)is not beneficially entitled to, or to rights entitling him to acquire, 5 per cent. or more of, or of any class of the shares comprised in, its issued share capital, and

(b)on a winding-up of the company would not be entitled to 5 per cent. or more of its assets;

and in determining whether the trusts permit property to be applied as mentioned in that subsection, no account shall be taken—

(i)of any power to make a payment which is the income of any person for any of the purposes of income tax, or would be the income for any of those purposes of a person not resident in the United Kingdom if he were so resident, or

(ii)if the trusts are those of a profit sharing scheme approved under Schedule 9 to the Taxes Act of any power to appropriate shares in pursuance of the scheme.

(7)In subsection (4) above “subsidiary” has the meaning given by section [F691159 of and Schedule 6 to] the Companies Act [F692006] and in subsections (5) and (6) above “participator” has the meaning given [F70by section 454 of CTA 2010], except that it does not include a loan creditor.

(8)In this section “close company” includes a company which, if resident in the United Kingdom, would be a close company as defined in section 288.

[F71239ZARelief for disposals by trustees of employee trustsU.K.

(1)Any gain accruing to trustees on the disposal of an asset comprised in the settled property of an employee trust shall not be a chargeable gain where the disposal is—

(a)a disposal to a beneficiary, or

(b)a deemed disposal under section 71(1),

if the conditions in subsection (2) are satisfied.

(2)The conditions are that—

(a)an amount that is equal to or exceeds the market value of the asset is chargeable to income tax as employment income within the meaning of section 7 of ITEPA 2003 (meaning of “employment income” etc);

(b)neither the beneficiary nor (if different) the person who is liable for the income tax is an excluded person;

(c)no actual consideration (as opposed to consideration deemed to be given by any enactment relating to the taxation of chargeable gains) is given directly or indirectly to the trustees for the asset; and

(d)Schedule 7D does not to any extent prevent the gain being a chargeable gain.

(3)The following are excluded persons—

(a)a participator in a company, shares in or securities of which are comprised in the settled property;

(b)a participator in a close company that has provided any property that has become comprised in the settled property;

(c)a person who was a participator in a company within paragraph (a) or (b) at any time during the 10 years before the shares, securities or other property concerned became comprised in the settled property;

(d)a person connected with a person within any of paragraphs (a) to (c).

(4)For the purposes of subsection (3)—

(a)“participator” has the same meaning as in section 239 and shall, in the case of a company which is not a close company, be construed as a person who would be a participator in the company if it were a close company, but

(b)a person is not a participator unless either—

(i)that person is entitled to, or entitled to rights enabling the acquisition of, 5% or more of the share capital of the company or any class of shares in the company, or

(ii)that person would be entitled to 5% or more of the company’s assets on winding-up.

(5)In determining whether a person is connected with another for the purposes of this section, section 286 shall apply as if subsection (8) of that section also mentioned uncle, aunt, nephew and niece.

(6)In this section—

• “beneficiary” means a person within paragraph (a) or (b) of section 86(1) of the Inheritance Tax Act 1984 (trusts for benefit of employees);

• “close company” includes a company which, if resident in the United Kingdom, would be a close company as defined in section 288;

• “employee trust” means a settlement of property to which section 86 of the Inheritance Tax Act 1984 applies or would apply but for subsection (3) of that section;

• “market value” means the market value for the purposes of capital gains tax (as to which see section 272).]

[F72Registered pension schemes U.K.

239ADe-registration of registered pension schemesU.K.

(1)This section applies where tax is charged in accordance with section 242 of the Finance Act 2004 (de-registration charge) where the registration of a registered pension scheme is withdrawn.

(2)For the purposes of this Act the assets which at the relevant time are held for the purposes of the pension scheme—

(a)are treated as having been acquired at the relevant time for a consideration equal to the amount on which tax is charged by virtue of section 242 of the Finance Act 2004 by the person who would be chargeable in respect of a chargeable gain accruing on a disposal of the assets at the relevant time, and

(b)are not to be treated as having been disposed of by any person at the relevant time.

(3)In subsection (2) “the relevant time” means the time immediately before the date of withdrawal of registration of the pension scheme.]

LeasesU.K.

240 Leases of land and other assets.U.K.

Schedule 8 shall have effect as respects leases of land and, to the extent specified in paragraph 9 of that Schedule, as respects leases of property other than land.

241 [F73UK furnished] holiday lettings.U.K.

(1)The following provisions of this section shall have effect with respect to the treatment for the purposes of tax on chargeable gains of the commercial letting of furnished holiday accommodation in the United Kingdom.

[F74(2)For the purposes of this section as it applies to capital gains tax the “commercial letting of furnished holiday accommodation” has the same meaning as it has for the purposes of Chapter 6 of Part 3 of ITTOIA 2005.

For the purposes of this section as it applies to corporation tax in respect of chargeable gains the “commercial letting of furnished holiday accommodation” [F75has the same meaning as it has for the purposes of Chapter 6 of Part 4 of CTA 2009].]

(3)[F76Subject to subsections (4) to (8) below, for the purposes of the provisions mentioned in subsection (3A) below—]

[F77(a)any [F78UK property business F79... which consists of, or so far as it consists of, the commercial letting of furnished holiday accommodation] shall be treated as a trade, and]

(b)all such lettings made by a particular person or partnership or body of persons shall be treated as one trade.

[F80(3A)The provisions referred to in subsection (3) above are—

• sections 152 to 157 (roll-over relief on replacement of business asset),

• section 165 (gifts relief),

• [F81section 169S(1) (entrepreneurs’ relief),]

• Section 253 (relief for loans to traders),

• F82. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F83. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., and

• Schedule 7AC (exemptions for disposals by companies with substantial shareholding).]

(4)Subject to subsection (5) below, for the purposes of the [F84provisions mentioned in subsection (3A)] above as they apply by virtue of this section, where in any chargeable period a person makes a commercial letting of furnished holiday accommodation [F85in the United Kingdom]—

(a)the accommodation shall be taken to be used in that period only for the purposes of the trade of making such lettings; and

(b)that trade shall be taken to be carried on throughout that period.

(5)Subsection (4) above does not apply to any part of a chargeable period during which the accommodation is neither let commercially nor available to be so let unless it is prevented from being so let or available by any works of construction or repair.

(6)Where—

(a)a gain to which section 222 applies accrues to any individual on the disposal of an asset; and

(b)by virtue of subsection (3) above the amount or value of the consideration for the acquisition of the asset is treated as reduced under section 152 or 153,

the gain to which section 222 applies shall be reduced by the amount of the reduction mentioned in paragraph (b) above.

(7)Where there is a letting of accommodation only part of which is holiday accommodation such apportionments shall be made for the purposes of this section as [F86are] just and reasonable.

(8)Where a person has been charged to tax in respect of chargeable gains otherwise than in accordance with the provisions of this section, such assessment, reduction or discharge of an assessment or, where a claim for repayment is made, such repayment, shall be made as may be necessary to give effect to those provisions.

[F87241A EEA furnished holiday lettingsU.K.

(1)The following provisions of this section shall have effect with respect to the treatment for the purposes of tax on chargeable gains of the commercial letting of furnished holiday accommodation in EEA states other than the United Kingdom.

(2)For the purposes of this section as it applies to capital gains tax, the “commercial letting of furnished holiday accommodation” has the same meaning as it has for the purposes of Chapter 6 of Part 3 of ITTOIA 2005.

(3)For the purposes of this section as it applies to corporation tax in respect of chargeable gains, the “commercial letting of furnished holiday accommodation” has the same meaning as it has for the purposes of Chapter 6 of Part 4 of CTA 2009.

(4)Subject to subsections (6) to (10) below, for the purposes of the provisions mentioned in subsection (5) below—

(a)any overseas property business which consists of, or so far as it consists of, the commercial letting of furnished holiday accommodation in one or more EEA states shall be treated as a trade, and

(b)all such lettings made by a particular person or partnership or body of persons shall be treated as one trade.

(5)The provisions referred to in subsection (4) above are—

• sections 152 to 157 (roll-over relief on replacement of business assets),

• section 165 (gifts relief),

• section 169S(1) (entrepreneurs' relief),

• section 253 (relief for loans to traders), and

• Schedule 7AC (exemptions for disposals by companies with substantial shareholdings).

(6)Subject to subsection (7) below, for the purposes of the provisions mentioned in subsection (5) above as they apply by virtue of this section, where in any chargeable period a person makes a commercial letting of furnished holiday accommodation in an EEA state other than the United Kingdom—

(a)the accommodation shall be taken to be used in that period only for the purposes of the trade of making such lettings, and

(b)that trade shall be taken to be carried on throughout that period.

(7)Subsection (6) does not apply to any part of a chargeable period during which the accommodation is neither let commercially nor available to be so let unless it is prevented from being so let or available by any works of construction or repair.

(8)Where—

(a)a gain to which section 222 applies accrues to any individual on the disposal of an asset, and

(b)by virtue of subsection (4) above the amount or value of the consideration for the acquisition of the asset is treated as reduced under section 152 or 153,

the gain to which section 222 applies shall be reduced by the amount of the reduction mentioned in paragraph (b) above.

(9)Where there is a letting of accommodation only part of which is holiday accommodation such apportionments shall be made for the purposes of this section as are just and reasonable.

(10)Where a person has been charged to tax in respect of chargeable gains otherwise than in accordance with the provisions of this section, such assessment, reduction or discharge of an assessment, or, where a claim for repayment is made, such repayment, shall be made as may be necessary to give effect to those provisions.

(11)In this section “overseas property business” means—

(a)an overseas property business within the meaning of the Income Tax Acts (see section 989 of ITA 2007), or

(b)a overseas property business within the meaning of the Corporation Tax Acts (see section 1119 of CTA 2010).]

Part disposalsU.K.

242 Small part disposals.U.K.

(1)This section applies to a transfer of land forming part only of a holding of land, where—

(a)the amount or value of the consideration for the transfer does not exceed one-fifth of the market value of the holding as it subsisted immediately before the transfer, and

(b)the transfer is not one which, by virtue of section 58 or 171(1), is treated as giving rise to neither a gain nor a loss.

(2)Subject to subsection (3) below, if the transferor so claims, the transfer shall not be treated for the purposes of this Act as a disposal, but all sums which, if it had been so treated, would 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 Part II as a deduction in computing a gain on any subsequent disposal of the holding.

[F88(2A)A claim under subsection (2) above shall be made—

(a)for the purposes of capital gains tax, on or before the first anniversary of the 31st January next following the year of assessment in which the transfer is made;

(b)for the purposes of corporation tax, within 2 years after the end of the accounting period in which the transfer is made.]

(3)This section shall not apply—

(a)if the amount or value of the consideration for the transfer exceeds £20,000, or

(b)where in the year of assessment in which the transfer is made, the transferor made any other disposal of land, if the total amount or value of the consideration for all disposals of land made by the transferor in that year exceeds £20,000.

(4)No account shall be taken under subsection (3) above of any transfer of land to which section 243 applies.

(5)In relation to a transfer which is not for full consideration in money or money’s worth “the amount or value of the consideration” in this section shall mean the market value of the land transferred.

(6)For the purposes of this section the holding of land shall comprise only the land in respect of which the expenditure allowable under paragraphs (a) and (b) of section 38(1) would be apportioned under section 42 if the transfer had been treated as a disposal (that is, as a part disposal of the holding).

(7)In this section references to a holding of land include references to any estate or interest in a holding of land, not being an estate or interest which is a wasting asset, and references to part of a holding shall be construed accordingly.

243 Part disposal to authority with compulsory powers.U.K.

(1)This section applies to a transfer of land forming part only of a holding of land to an authority exercising or having compulsory powers where—

(a)the amount or value of the consideration for the transfer, or if the transfer is not for full consideration in money or money’s worth, the market value of the land transferred, is small, as compared with the market value of the holding as it subsisted immediately before the transfer, and

(b)the transferor had not taken any steps by advertising or otherwise to dispose of any part of the holding or to make his willingness to dispose of it known to the authority or others.

(2)If the transferor so claims, the transfer shall not be treated for the purposes of this Act as a disposal, but all sums which, if it had been so treated, would 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 Part II as a deduction in computing a gain on any subsequent disposal of the holding.

[F89(2A)A claim under subsection (2) above shall be made—

(a)for the purposes of capital gains tax, on or before the first anniversary of the 31st January next following the year of assessment in which the transfer is made;

(b)for the purposes of corporation tax, within 2 years after the end of the accounting period in which the transfer is made.]

(3)For the purposes of this section the holding of land shall comprise only the land in respect of which the expenditure allowable under paragraphs (a) and (b) of section 38(1) would be apportioned under section 42 if the transfer had been treated as a disposal (that is, as a part disposal of the holding).

(4)In this section references to a holding of land include references to an estate or interest in a holding of land, not being an estate or interest which is a wasting asset, and references to part of a holding shall be construed accordingly.

(5)In this section “authority exercising or having compulsory powers” means, in relation to the land transferred, a person or body of persons acquiring it compulsorily or who has or have been, or could be, authorised to acquire it compulsorily for the purposes for which it is acquired, or for whom another person or body of persons has or have been, or could be, authorised so to acquire it.

244 Part disposal: consideration exceeding allowable expenditure.U.K.

(1)The provisions of sections 242(2) and 243(2) shall have effect subject to this section.

(2)Where the allowable expenditure is less than the consideration for the part disposal (or is nil)—

(a)the said provisions shall not apply, and

(b)if the recipient so elects (and there is any allowable expenditure)—

(i)the consideration for the part 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 part disposal or on any subsequent occasion.

In this subsection “allowable expenditure” means expenditure which, immediately before the part disposal, was attributable to the holding of land under paragraphs (a) and (b) of section 38(1).

[F90(3)An election under subsection (2)(b) above shall be made—

(a)for the purposes of capital gains tax, on or before the first anniversary of the 31st January next following the year of assessment in which the part disposal is made;

(b)for the purposes of corporation tax, within 2 years after the end of the accounting period in which the part disposal is made.]

Compulsory acquisitionU.K.

245 Compensation paid on compulsory acquisition.U.K.

(1)Where land or an interest in or right over land is acquired and the acquisition is, or could have been, made under compulsory powers, then in considering whether, under section 52(4), the purchase price or compensation or other consideration for the acquisition should be apportioned and treated in part as a capital sum within section 22(1)(a), whether as compensation for loss of goodwill or for disturbance or otherwise, or should be apportioned in any other way, the fact that the acquisition is or could have been made compulsorily, and any statutory provision treating the purchase price or compensation or other consideration as exclusively paid in respect of the land itself, shall be disregarded.

(2)In any case where land or an interest in land is acquired as mentioned in subsection (1) above from any person and the compensation or purchase price includes an amount in respect of severance of the land comprised in the acquisition or sale from other land in which that person is entitled in the same capacity to an interest, or in respect of that other land as being injuriously affected, there shall be deemed for the purposes of this Act to be a part disposal of that other land.

246 Time of disposal and acquisition.U.K.

Where an interest in land is acquired, otherwise than under a contract, by an authority possessing compulsory purchase powers, the time at which the disposal and acquisition is made is the time at which the compensation for the acquisition is agreed or otherwise determined (variations on appeal being disregarded for this purpose) F91... .

247 Roll-over relief on compulsory acquisition.U.K.

(1)This section applies where—

(a)land (“the old land”) is disposed of by any person (“the landowner”) to an authority exercising or having compulsory powers; and

(b)the landowner did not take any steps, by advertising or otherwise, to dispose of the old land or to make his willingness to dispose of it known to the authority or others; and

(c)the consideration for the disposal is applied by the landowner in acquiring other land (“the new land”) not being land excluded from this paragraph by section 248.

(2)Subject to section 248, in a case where the whole of the consideration for the disposal was applied as mentioned in subsection (1)(c) above, the landowner, on making a claim as respects the consideration so applied, shall be treated for the purposes of this Act—

(a)as if the consideration for the disposal of the old land were (if otherwise of a greater amount or value) 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 or value of the consideration for the acquisition of the new land were reduced by the excess of the amount or value of the actual consideration for the disposal of the old land over the amount of the consideration which he is treated as receiving under paragraph (a) above.

(3)If part only of the consideration for the disposal of the old land was applied as mentioned in subsection (1)(c) above, then, subject to section 248, if the part of the consideration which was not so applied (“the unexpended consideration”) is less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal of the old land, the landowner, on making a claim as respects the consideration which was so applied, shall 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 unexpended consideration (and, if not all chargeable gain, with a proportionate reduction in the amount of the chargeable gain); and

(b)as if the amount or value of the consideration for the acquisition of the new land were reduced by the amount by which the gain is reduced (or, as the case may be, the amount by which the chargeable gain is proportionately reduced) under paragraph (a) above.

(4)Nothing in subsection (2) or subsection (3) above affects the treatment for the purposes of this Act of the authority by whom the old land was acquired or of the other party to the transaction involving the acquisition of the new land.

(5)For the purposes of this section—

(a)subsection (2) of section 152 shall apply in relation to subsection (2)(a) and subsection (2)(b) above as it applies in relation to subsection (1)(a) and subsection (1)(b) of that section; and

(b)[F92subsections (3) and (4)] of that section shall apply as if any reference to the new assets were a reference to the new land, any reference to the old assets were a reference to the old land and any reference to that section were a reference to this.

[F93(5A)Subsections (2A) and (2C) of section 175 shall apply in relation to this section as they apply in relation to section 152 (but as if the reference in subsection (2C) to the new assets were a reference to the new land).]

(6)Where this section applies, any such amount as is referred to in subsection (2) of section 245 shall be treated as forming part of the consideration for the disposal of the old land and, accordingly, so much of that subsection as provides for a deemed disposal of other land shall not apply.

(7)The provisions of this Act fixing the amount of the consideration deemed to be given for the acquisition or disposal of assets shall be applied before this section is applied.

(8)In this section—

• “land” includes any interest in or right over land; and

• “authority exercising or having compulsory powers” shall be construed in accordance with section 243(5).

[F94247A Provisional application of section 247.U.K.

(1)This section applies where a person who disposes of land (“the old land”) to an authority exercising or having compulsory powers declares, in his return for the chargeable period in which the disposal takes place—

(a)that the whole or any specified part of the consideration for the disposal will be applied in the acquisition of other land (“the new land”);

(b)that the acquisition will take place as mentioned in subsection (3) of section 152; and

(c)that the new land will not be land excluded from section 247(1)(c) by section 248.

(2)Until the declaration ceases to have effect, section 247 shall apply as if the acquisition had taken place and the person had made a claim under that section.

(3)For the purposes of this section, subsections (3) to (5) of section 153A shall apply as if the reference to section 152 or 153 were a reference to section 247 and the reference to the old assets were a reference to the old land.

(4)In this section “land” and “authority exercising or having compulsory powers” have the same meaning as in section 247.]

248 Provisions supplementary to section 247.U.K.

(1)Land is excluded from paragraph (c) of subsection (1) of section 247 if—

(a)it is a dwelling-house or part of a dwelling-house (or an interest in or right over a dwelling-house), and

(b)by virtue of, or of any claim under, any provision of sections 222 to 226 the whole or any part of a gain accruing on a disposal of it by the landowner at a material time would not be a chargeable gain;

and for the purposes of this subsection “a material time” means any time during the period of 6 years beginning on the date of the acquisition referred to in the said paragraph (c).

(2)If, at any time during the period of 6 years referred to in subsection (1) above, land which at the beginning of that period was not excluded from section 247(1)(c) by virtue of that subsection becomes so excluded, the amount of any chargeable gain accruing on the disposal of the old land shall be redetermined without regard to any relief previously given under section 247 by reference to the amount or value of the consideration for the acquisition of that land; and all such adjustments of capital gains tax, whether by way of assessment or otherwise, may be made at any time, notwithstanding anything in section 34 of the Management Act (time limit for assessments).

This subsection also applies where the period of 6 years referred to above began before the commencement of this section (and accordingly the references to section 247 include references to section 111A of the 1979 Act).

(3)Where the new land is a depreciating asset, within the meaning of section 154, that section has effect as if—

(a)any reference in subsection (1) or subsection (4) to section 152 or 153 were a reference to subsection (2) or subsection (3) respectively of section 247; and

(b)paragraph (b) of subsection (2) were omitted; and

(c)the reference in subsection (5) to section 152(3) were a reference to that provision as applied by section 247(5).

(4)No claim may be made under section 243 in relation to a transfer which constitutes a disposal in respect of which a claim is made under section 247.

(5)Expressions used in this section have the same meaning as in section 247.

[F95Joint interests in landU.K.

248ARoll-over relief on disposal of joint interests in land: conditionsU.K.

(1)Section 248B applies where conditions A to E are met.

(2)Condition A is that a person (“the landowner”) and one or more other persons jointly hold—

(a)a holding of land, or

(b)two or more separate holdings of land.

(3)Condition B is that the landowner disposes of an interest (“the relinquished interest”) in—

(a)the holding, or

(b)one or more of the holdings,

to the co-owner or to one or more of the co-owners.

(4)Condition C is that the consideration for the disposal is or includes an interest (“the acquired interest”) in a holding of land held jointly by the landowner and one or more of the co-owners.

(5)Condition D is that as a consequence of the disposal (taken together with any related disposals) the landowner and each of the co-owners become—

(a)in a case falling within subsection (2)(a), the sole owner of part of the holding, or

(b)in a case falling within subsection (2)(b), the sole owner of one or more of the holdings.

(6)Condition E is that the acquired interest is not an interest in excluded land (see section 248C).

(7)For the purposes of this section—

(a)references to a holding of land include references to an estate or interest in a holding of land, and are to be read in accordance with section 243(3);

(b)references to holding land jointly are to holding land—

(i)in England and Wales, as joint tenants or tenants in common,

(ii)in Scotland, as joint owners or owners in common, or

(iii)in Northern Ireland, as joint tenants, tenants in common or coparceners;

(c)“co-owner” means any person who holds a holding of land jointly with the landowner;

(d)a related disposal (in relation to a disposal mentioned in condition B) is a disposal of an interest in the holding, or in one or more of the holdings, which is made—

(i)by the landowner to a co-owner, or

(ii)by a co-owner to the landowner or another co-owner,

at the same time as the disposal mentioned in that condition;

(e)spouses who are living together, or civil partners who are living together, are together treated as a landowner or a co-owner.

248BCalculation of reliefU.K.

(1)In a case where the amount or value of the consideration for the disposal of the relinquished interest is equal to or less than the market value of that interest, the landowner, on making a claim, is to be treated for the purposes of this Act—

(a)as if the consideration for the disposal of the relinquished interest were of such amount as would secure that on the disposal neither a gain nor a loss accrues, and

(b)as if the amount or value of the consideration for the acquisition of the acquired interest were reduced by the excess of the amount or value of the actual consideration for the disposal of the relinquished interest over the amount of the consideration which the landowner is treated as receiving under paragraph (a).

(2)In a case where the amount or value of the consideration for the disposal of the relinquished interest exceeds the market value of that interest, then if the excess (“the excess consideration”) is less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal of the relinquished interest, the landowner, on making a claim, is to 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 excess consideration (and, if not all chargeable gain, with a proportionate reduction in the amount of the chargeable gain), and

(b)as if the amount or value of the consideration for the acquisition of the acquired interest were reduced by the amount by which the gain is reduced (or, as the case may be, the amount by which the chargeable gain is proportionately reduced) under paragraph (a).

(3)Subsections (1) and (2) are subject to section 248C(3).

(4)Nothing in subsection (1) or (2) affects the treatment for the purposes of this Act of a co-owner (within the meaning given by section 248A(7)).

(5)Where subsection (1)(a) applies to exclude a gain which, in consequence of Schedule 2 (assets held on 6th April 1965) is not all chargeable gain, the amount of the reduction to be made under subsection (1)(b) shall be the amount of the chargeable gain, and not the whole amount of the gain.

248CExcluded landU.K.

(1)Land is excluded land to the extent that—

(a)it is a dwelling-house or part of a dwelling-house (or an interest in or right over a dwelling-house), and

(b)by virtue of, or of any claim under, any provision of sections 222 to 226 (private residences) the whole or any part of a gain accruing on a disposal of it by the landowner at a material time would not be a chargeable gain.

(2)In subsection (1)(b), “a material time” means any time during the period of 6 years beginning on the date of the acquisition of the acquired interest.

(3)If land was not excluded land at the date of the acquisition of the acquired interest but becomes excluded land within 6 years of the acquisition, the amount of any chargeable gain accruing on the disposal of the relinquished interest shall be re-determined without regard to any relief previously given under section 248B by reference to the amount or value of the consideration for the acquisition of the interest in that land.

(4)Any adjustments of capital gains tax in accordance with subsection (3), whether by way of assessment or otherwise, may be made at any time, despite anything in section 34 of the Management Act (time limit for assessments).

(5)Expressions used in this section have the same meaning as in section 248A.

248DMilk quotasU.K.

(1)This section applies where—

(a)section 248B applies to a holding (or holdings) of land, and

(b)milk quota is associated with the holding in which the relinquished interest is held and with the holding in which the acquired interest is held.

(2)Section 248B(1), (2) and (4) apply—

(a)to the disposal of quota associated with the holding in which the relinquished interest is held as they apply to the disposal of that interest, and

(b)to the acquisition of quota associated with the holding in which the acquired interest is held as they apply to the acquisition of that interest.

248ERelief on disposal of joint interests in private residenceU.K.

(1)This section applies where conditions A to E are met.

(2)Condition A is that a person (“the landowner”) and one or more other persons jointly hold an interest in two or more dwelling–houses.

(3)Condition B is that the landowner disposes of an interest (“the relinquished interest”) in one or more of the dwelling-houses to the co-owner or to one or more of the co-owners.

(4)Condition C is that the consideration for the disposal is or includes an interest (“the acquired interest”) in one of the other dwelling–houses.

(5)Condition D is that as a consequence of the disposal (taken together with any related disposals)—

(a)the dwelling-house in which the landowner acquires an interest becomes the only or main residence of the landowner, and

(b)each of the other dwelling-houses becomes the only or main residence of one (and only one) of the co-owners.

(6)Condition E is that if each dwelling-house were disposed of immediately after the disposal (or disposals) mentioned in subsection (5) then by virtue of sections 222 and 223 (private residences) no part of the gain accruing on each of those disposals would be a chargeable gain.

(7)The landowner, on making a claim jointly with the co-owner or co-owners, shall be treated for the purposes of this Act—

(a)as if the consideration for the disposal of the relinquished interest were of such amount as would secure that on the disposal neither a gain nor a loss accrues, and

(b)as if the acquired interest were acquired by the landowner—

(i)at the time it was acquired jointly by the landowner and the co-owner or co-owners, and

(ii)for a consideration equal to the amount of the sums that would have been allowable under section 38(1)(a) and (b) (acquisition and disposal costs etc) as a deduction in the computation of any gain on a disposal of the acquired interest by the co-owner or co-owners.

(8)For the purposes of this section—

(a)“co-owner” means any person who holds an interest in a dwelling-house jointly with the landowner;

(b)references to holding land jointly are to holding land—

(i)in England and Wales, as joint tenants or tenants in common,

(ii)in Scotland, as joint owners or owners in common, or

(iii)in Northern Ireland, as joint tenants, tenants in common or coparceners;

(c)a related disposal (in relation to a disposal mentioned in condition B) is a disposal of an interest in a dwelling-house which is made—

(i)by the landowner to a co-owner, or

(ii)by a co-owner to the landowner or another co-owner,

at the same time as the disposal mentioned in that condition;

(d)spouses who are living together, or civil partners who are living together, are together treated as a landowner or a co-owner.]

Agricultural land and woodlandsU.K.

249 Grants for giving up agricultural land.U.K.

For the purposes of capital gains tax, a sum payable to an individual by virtue of a scheme under section 27 of the M8Agriculture Act 1967 (grants for relinquishing occupation of uncommercial agricultural units) shall not be treated as part of the consideration obtained by him for, or otherwise as accruing to him on, the disposal of any asset.

250 Woodlands.U.K.

(1)Consideration for the disposal of trees standing or felled or cut on woodlands managed by the occupier on a commercial basis and with a view to the realisation of profits shall be excluded from the computation of the gain if the person making the disposal is the occupier.

(2)Capital sums received under a policy of insurance in respect of the destruction of or damage or injury to trees by fire or other hazard on such woodlands shall be excluded from the computation of the gain if the person making the disposal is the occupier.

(3)Subsection (2) above has effect notwithstanding section 22(1).

(4)In the computation of the gain so much of the cost of woodland in the United Kingdom shall be disregarded as is attributable to trees growing on the land.

(5)In the computation of the gain accruing on a disposal of woodland in the United Kingdom so much of the consideration for the disposal as is attributable to trees growing on the land shall be excluded.

(6)References in this section to trees include references to saleable underwood.

DebtsU.K.

251 General provisions.U.K.

(1)Where a person incurs a debt to another, whether in sterling or in some other currency, no chargeable gain shall accrue to that (that is the original) creditor or his personal representative or legatee on a disposal of the debt, except in the case of the debt on a security (as defined in section 132).

(2)Subject to the provisions of sections [F96132, 135 and 136] and subject to subsection (1) above, the satisfaction of a debt or part of it (including a debt on a security as defined in section 132) shall be treated as a disposal of the debt or of that part by the creditor made at the time when the debt or that part is satisfied.

(3)Where property is acquired by a creditor in satisfaction of his debt or part of it, then subject to the provisions of sections [F97132, 135 and 136] the property shall not be treated as disposed of by the debtor or acquired by the creditor for a consideration greater than its market value at the time of the creditor’s acquisition of it; but if under subsection (1) above (and in a case not falling within [F98section 132, 135 or 136]) no chargeable gain is to accrue on a disposal of the debt by the creditor (that is the original creditor), and a chargeable gain accrues to him on a disposal by him of the property, the amount of the chargeable gain shall (where necessary) be reduced so as not to exceed the chargeable gain which would have accrued if he had acquired the property for a consideration equal to the amount of the debt or that part of it.

(4)A loss accruing on the disposal of a debt acquired by the person making the disposal from the original creditor or his personal representative or legatee at a time when the creditor or his personal representative or legatee is a person connected with the person making the disposal, and so acquired either directly or by one or more purchases through persons all of whom are connected with the person making the disposal, shall not be an allowable loss.

(5)[F99Where the trustees of a settlement are the original creditor], subsections (1) and (4) above shall apply as if for the references to the original creditor’s personal representative or legatee there were substituted references to any person becoming absolutely entitled, [F100as against the trustees], to the debt on its ceasing to be settled property, and to that person’s personal representative or legatee.

[F101(6)For the purposes of this section a debenture issued by any company on or after 16th March 1993 shall be deemed to be a security (as defined in section 132) if—

(a)it is issued on a reorganisation (as defined in section 126(1)) or in pursuance of its allotment on any such reorganisation;

(b)it is issued in exchange for shares in or debentures of another company and in a case [F102to which section 135 applies and which is unaffected by section 137(1)];

(c)it is issued under any such arrangements as are mentioned in subsection (1)(a) of section 136 and in a case unaffected by section 137 where section 136 requires shares or debentures in another company to be treated as exchanged for, or for anything that includes, that debenture; or

(d)it is issued in pursuance of rights attached to any debenture issued on or after 16th March 1993 and falling within paragraph (a), (b) or (c) above

[F103and any debenture which results from a conversion of securities within the meaning of section 132, or is issued in pursuance of rights attached to such a debenture, shall be deemed for the purposes of this section to be a security (as defined in that section).]]

[F104(7)Where any instrument specified in subsection (8) below is not a security (as defined in section 132), that instrument shall be deemed to be such a security for the purposes of this section, other than the purposes of determining what is or is not an allowable loss in any case.

(8)The instruments mentioned in subsection (7) above are—

F105(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)any instrument which F106... is not a loan relationship of a company but which would be a [F107deeply discounted security for the purposes of Chapter 8 of Part 4 of ITTOIA 2005 if section 432(2) of that Act] (excluded indexed securities) were omitted.]

252 Foreign currency bank accounts.U.K.

(1)Subject to subsection (2) below, section 251(1) shall not apply to a debt owed by a bank which is not in sterling and which is represented by a sum standing to the credit of a person in an account in the bank.

(2)Subsection (1) above shall not apply to a sum in an individual’s bank account representing currency acquired by the holder for the personal expenditure outside the United Kingdom of himself or his family or dependants (including expenditure on the provision or maintenance of any residence outside the United Kingdom).

[F108252AForeign currency bank accounts and the remittance basisU.K.

Schedule 8A contains provision about the calculation of chargeable gains on disposals of debts to which section 252(1) applies which are not situated in the United Kingdom.]

253 Relief for loans to traders.U.K.

(1)In this section “a qualifying loan” means a loan in the case of which—

(a)the money lent is used by the borrower wholly for the purposes of a trade carried on by him, not being a trade which consists of or includes the lending of money, and

(b)the borrower is resident in the United Kingdom, and

(c)the borrower’s debt is not a debt on a security as defined in section 132;

and for the purposes of paragraph (a) above money used by the borrower for setting up a trade which is subsequently carried on by him shall be treated as used for the purposes of that trade.

(2)In subsection (1) above references to a trade include references to a profession or vocation; and where money lent to a company is lent by it to another company in the same group, being a trading company, that subsection shall apply to the money lent to the first-mentioned company as if it had used it for any purpose for which it is used by the other company while a member of the group.

(3)[F109Where a person who has made a qualifying loan makes a claim and at that time]—

(a)any outstanding amount of the principal of the loan has become irrecoverable, and

(b)the claimant has not assigned his right to recover that amount, and

(c)the claimant and the borrower were not each other’s spouses [F110or civil partners], or companies in the same group, when the loan was made or at any subsequent time,

[F111then, to the extent that that amount is not an amount which, in the case of the claimant, falls to be brought into account as a debit given for the purposes of [F112Part 5 of CTA 2009] (loan relationships),] this Act shall have effect as if an allowable loss equal to that amount had accrued to the claimant [F113at the time of the claim or (subject to subsection (3A) below) any earlier time specified in the claim].

[F114(3A)For the purposes of subsection (3) above, an earlier time may be specified in the claim if:

(a)the amount to which that subsection applies was also irrecoverable at the earlier time; and either

(b)for capital gains tax purposes the earlier time falls not more than two years before the beginning of the year of assessment in which the claim is made; or

(c)for corporation tax purposes the earlier time falls on or after the first day of the earliest accounting period ending not more than two years before the time of the claim.]

(4)[F115Where a person who has guaranteed the repayment of a loan which is, or but for subsection (1)(c) above would be, a qualifying loan makes a claim and at that time]—

(a)any outstanding amount of, or of interest in respect of, the principal of the loan has become irrecoverable from the borrower, and

(b)the claimant has made a payment under the guarantee (whether to the lender or a co-guarantor) in respect of that amount, and

(c)the claimant has not assigned any right to recover that amount which has accrued to him (whether by operation of law or otherwise) in consequence of his having made the payment, and

(d)the lender and the borrower were not each other’s spouses [F116or civil partners], or companies in the same group, when the loan was made or at any subsequent time and the claimant and the borrower were not each other’s spouses [F116or civil partners], and the claimant and the lender were not companies in the same group, when the guarantee was given or at any subsequent time,

this Act shall have effect as if an allowable loss had accrued to the claimant when the payment was made; and the loss shall be equal to the payment made by him in respect of the amount mentioned in paragraph (a) above less any contribution payable to him by any co-guarantor in respect of the payment so made.

[F117(4A)A claim under subsection (4) above shall be made—

(a)for the purposes of capital gains tax, [F118not more than 4 years after the end of] the year of assessment in which the payment was made;

(b)for the purposes of corporation tax, within [F1194 years] after the end of the accounting period in which the payment was made.]

(5)Where an allowable loss has been treated under subsection (3) or (4) above as accruing to any person and the whole or any part of the outstanding amount mentioned in subsection (3)(a) or, as the case may be, subsection (4)(a) is at any time recovered by him, this Act shall have effect as if there had accrued to him at that time a chargeable gain equal to so much of the allowable loss as corresponds to the amount recovered.

(6)Where—

(a)an allowable loss has been treated under subsection (4) above as accruing to any person, and

(b)the whole or any part of the amount of the payment mentioned in subsection (4)(b) is at any time recovered by him,

this Act shall have effect as if there had accrued to him at that time a chargeable gain equal to so much of the allowable loss as corresponds to the amount recovered.

(7)Where—

(a)an allowable loss has been treated under subsection (3) above as accruing to a company (“the first company”), and

(b)the whole or any part of the outstanding amount mentioned in subsection (3)(a) is at any time recovered by a company (“the second company”) in the same group as the first company,

this Act shall have effect as if there had accrued to the second company at that time a chargeable gain equal to so much of the allowable loss as corresponds to the amount recovered.

(8)Where—

(a)an allowable loss has been treated under subsection (4) above as accruing to a company (“the first company”), and

(b)the whole or any part of the outstanding amount mentioned in subsection (4)(a), or the whole or any part of the amount of the payment mentioned in subsection (4)(b), is at any time recovered by a company (“the second company”) in the same group as the first company,

this Act shall have effect as if there had accrued to the second company at that time a chargeable gain equal to so much of the allowable loss as corresponds to the amount recovered.

(9)For the purposes of subsections (5) to (8) above, a person shall be treated as recovering an amount if he (or any other person by his direction) receives any money or money’s worth in satisfaction of his right to recover that amount or in consideration of his assignment of the right to recover it; and where a person assigns such a right otherwise than by way of a bargain made at arm’s length he shall be treated as receiving money or money’s worth equal to the market value of the right at the time of the assignment.

(10)No amount shall be treated under this section as giving rise to an allowable loss or chargeable gain in the case of any person if it falls to be taken into account in computing his income for the purposes of income tax or corporation tax.

(11)Where an allowable loss has been treated as accruing to a person under subsection (4) above by virtue of a payment made by him at any time under a guarantee—

(a)no chargeable gain shall accrue to him otherwise than under subsection (5) above, and

(b)no allowable loss shall accrue to him under this Act,

on his disposal of any rights that have accrued to him (whether by operation of law or otherwise) in consequence of his having made any payment under the guarantee at or after that time.

(12)References in this section to an amount having become irrecoverable do not include references to cases where the amount has become irrecoverable in consequence of the terms of the loan, of any arrangements of which the loan forms part, or of any act or omission by the lender or, in a case within subsection (4) above, the guarantor.

(13)For the purposes of subsections (7) and (8) above, 2 companies are in the same group if they were in the same group when the loan was made or have been in the same group at any subsequent time.

(14)In this section—

(a)“spouses” means spouses who are living together (construed in accordance with section 288(3)),

[F120(aa)“civil partners” means civil partners who are living together (construed in accordance with section 288(3)),]

(b)“trading company” has the [F121same meaning as in section 165 (see section 165A)], and

(c)“group” shall be construed in accordance with section 170.

(15)Subsection (3) above does not apply where the loan was made before 12th April 1978 and subsection (4) above does not apply where the guarantee was given before that date.

F122254 Relief for debts on qualifying corporate bonds.U.K.

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

F122255 Provisions supplementary to section 254.U.K.

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

Charities and gifts of non-business assets etc.U.K.

256 Charities.U.K.

(1)Subject to F123... [F124the following provisions of this section], a gain shall not be a chargeable gain if it accrues to a charity and is applicable and applied for charitable purposes.

(2)If property held on charitable trusts ceases to be subject to charitable trusts—

(a)the trustees shall be treated as if they had disposed of, and immediately reacquired, the property for a consideration equal to its market value, any gain on the disposal being treated as not accruing to a charity, and

(b)if and so far as any of that property represents, directly or indirectly, the consideration for the disposal of assets by the trustees, any gain accruing on that disposal shall be treated as not having accrued to a charity,

and an assessment to capital gains tax chargeable by virtue of paragraph (b) above may be made at any time not more than 3 years after the end of the year of assessment in which the property ceases to be subject to charitable trusts.

[F125(3)Subsection (4) below applies if a charitable trust has a non-exempt amount under section 540 of ITA 2007 for a year of assessment.

[F126(3A)Subsection (4) below also applies if a charitable company has a non-exempt amount under section 493 of CTA 2010 for an accounting period.]

[F127(4)Gains accruing—

(a)to the charitable trust in the year of assessment, or

(b)to the charitable company in the accounting period,

are treated as being, and always having been, chargeable gains so far as they are attributed to the non-exempt amount under section 256A (in the case of a charitable trust) or section 256C (in the case of a charitable company).]

(5)For restrictions on exemptions under Part 10 of ITA 2007 (special rules about charitable trusts etc) see section 539 of that Act.]

F128(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F129(7)For restrictions on exemptions under Part 11 of CTA 2010 (charitable companies etc) see section 492 of that Act.

F130(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]

[F131256AAttributing gains to the non-exempt amount[F132: charitable trusts] U.K.

(1)This section applies if a charitable trust has a non-exempt amount under section 540 of ITA 2007 for a year of assessment.

(2)Attributable gains of the charitable trust for the year of assessment may be attributed to the non-exempt amount but only so far as the non-exempt amount has not been used up.

(3)The non-exempt amount can be used up (in whole or in part) by—

(a)attributable gains being attributed to it under this section, or

(b)attributable income being attributed to it under section 541 of ITA 2007.

(4)The whole of the non-exempt amount must be used up by—

(a)attributable gains being attributed to the whole of it under this section,

(b)attributable income being attributed to the whole of it under section 541 of ITA 2007, or

(c)a combination of attributable gains being attributed to some of it under this section and attributable income being attributed to the rest of it under section 541 of ITA 2007.

(5)See section 256B for the way in which gains are to be attributed to the non-exempt amount under this section.

(6)In this section and section 256B a charitable trust's “attributable income”, and “attributable gains”, for a tax year have the same meaning as in Part 10 of ITA 2007 (see section 540 of that Act).

256BHow gains are attributed to the non-exempt amount[F133: charitable trusts] U.K.

(1)This section is about the ways in which attributable gains can be attributed to a non-exempt amount under section 256A.

(2)The trustees of the charitable trust may specify the attributable gains that are to be attributed to the non-exempt amount.

(3)A specification under subsection (2) is made by notice to an officer of Revenue and Customs.

(4)Subsection (6) applies if—

(a)an officer of Revenue and Customs requires the trustees of a charitable trust to make a specification under this section, and

(b)the trustees have not given notice under subsection (3) of the specification before the end of the required period.

(5)The required period is 30 days beginning with the day on which the officer made the requirement.

(6)An officer of Revenue and Customs may determine the attributable gains that are to be attributed to the non-exempt amount.]

[F134256CAttributing gains to the non-exempt amount: charitable companiesU.K.

(1)This section applies if a charitable company has a non-exempt amount under section 493 of CTA 2010 for an accounting period.

(2)Attributable gains of the charitable company for the period may be attributed to the non-exempt amount but only so far as the non-exempt amount has not been used up.

(3)The non-exempt amount can be used up (in whole or in part) by—

(a)attributable gains being attributed to it under this section, or

(b)attributable income being attributed to it under section 494 of CTA 2010.

(4)The whole of the non-exempt amount must be used up by—

(a)attributable gains being attributed to the whole of it under this section,

(b)attributable income being attributed to the whole of it under section 494 of CTA 2010, or

(c)a combination of attributable gains being attributed to some of it under this section and attributable income being attributed to the rest of it under section 494 of CTA 2010.

(5)In this section and section 256D a charitable company's “attributable income” and “attributable gains” for an accounting period have the same meaning as in Part 11 of CTA 2010 (see section 493 of that Act).

F135(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

256DHow gains are attributed to the non-exempt amount: charitable companiesU.K.

(1)This section is about the ways in which attributable gains can be attributed to a non-exempt amount under section 256C.

(2)The charitable company may specify the attributable gains that are to be attributed to the non-exempt amount.

(3)A specification under subsection (2) is made by notice to an officer of Revenue and Customs.

(4)Subsection (6) applies if—

(a)an officer of Revenue and Customs requires a charitable company to make a specification under this section, and

(b)the charitable company has not given notice under subsection (3) of the specification before the end of the required period.

(5)The required period is 30 days beginning with the day on which the officer made the requirement.

(6)An officer of Revenue and Customs may determine the attributable gains that are to be attributed to the non-exempt amount.

F136(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]

257 Gifts to charities etc.U.K.

(1)Subsection (2) below shall apply where a disposal of an asset is made otherwise than under a bargain at arm’s length—

(a)to a charity [F137or a registered club], or

(b)to any bodies mentioned in Schedule 3 to the M9Inheritance Tax Act 1984 (gifts for national purposes, etc)

[F138and the disposal is not one in relation to which section 151A(1) has effect.]

(2)Sections 17(1) and 258(3) shall not apply; but if the disposal is by way of gift (including a gift in settlement) or for a consideration not exceeding the sums allowable as a deduction under section 38, then—

(a)the disposal and acquisition shall be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal, and

(b)where, after the disposal, the asset is disposed of by the person who acquired it under the disposal, its acquisition by the person making the earlier disposal shall be treated for the purposes of this Act as the acquisition of the person making the later disposal.

[F139(2A)Subsection (2B) applies if relief is available under Chapter 3 of Part 8 of ITA 2007 or [F140as a result of Chapter 3 of Part 6 of CTA 2010] (gifts of shares, securities and real property to charities) in relation to the disposal of a qualifying investment to a charity (whether or not a claim for relief is actually made).

(2B)The consideration for which the charity's acquisition of the qualifying investment is treated by virtue of subsection (2) above as having been made—

[F141(a)is reduced by the relievable amount within the meaning of Chapter 3 of Part 8 of ITA 2007 if relief in relation to the disposal is available only under that Chapter,

(b)is reduced by the relievable amount within the meaning of Chapter 3 of Part 6 of CTA 2010 if relief in relation to the disposal is available only as a result of that Chapter,

(c)is reduced by the relievable amount within the meaning of Chapter 3 of Part 8 of ITA 2007 if relief in relation to the disposal is available both under that Chapter and as a result of Chapter 3 of Part 6 of CTA 2010 because of section 442 of ITA 2007 and section 214 of CTA 2010, or]

(d)is reduced to nil if that consideration is less than the amount referred to in paragraph (a), (b) or (c) (as the case may be).

(2C)In subsections (2A) and (2B)—

• “qualifying investment” has the same meaning as in Chapter 3 of Part 8 of ITA 2007 (see section 432 of that Act),

• F142. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F142. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]

(3)Where—

(a)otherwise than on the termination of a life interest (within the meaning of section 72) by the death of the person entitled thereto, any assets or parts of any assets forming part of settled property are, under section 71, deemed to be disposed of and reacquired by the trustee, and

(b)the person becoming entitled as mentioned in section 71(1) is a charity, [F143a registered club] or a body mentioned in Schedule 3 to the Inheritance Tax Act 1984 (gifts for national purposes, etc),

then, if no consideration is received by any person for or in connection with any transaction by virtue of which the charity[F144, registered club] or other body becomes so entitled, the disposal and reacquisition of the assets to which the charity[F144, registered club] or other body becomes so entitled shall, notwithstanding section 71, be treated for the purposes of this Act as made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.

(4)In subsection (2)(b) above the first reference to a disposal includes a disposal to which section 146(2) of the 1979 Act applied where the person who acquired the asset on that disposal disposes of the asset after the coming into force of this section.

[F145(5)For the purposes of this section “registered club” has the same meaning as in Chapter 9 of Part 13 of CTA 2010.]

[F146257ATainted charity donationsU.K.

(1)Section 257 does not apply in relation to—

(a)a tainted donation made by a person, or

(b)any associated donation.

(2)For the purposes of this section—

(a)“tainted donation” means a tainted donation within the meaning of Chapter 8 of Part 13 of ITA 2007 (tainted charity donations: removal of income tax reliefs etc) or Part 21C of CTA 2010 (tainted charity donations: removal of corporation tax relief), and

(b)“associated donation” means an associated donation within the meaning of section 809ZM of ITA 2010 or section 939F of CTA 2010.]

258 Works of art etc.U.K.

F147(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)A gain shall not be a chargeable gain if it accrues on the disposal of an asset [F148which is property which has been or could be designated under section 31 of the Inheritance Tax Act 1984 (“the 1984 Act”) (designation and undertakings)] and—

(a)the disposal is by way of sale by private treaty to a body mentioned in Schedule 3 to [F149the 1984 Act] (museums, etc.), or is to such a body otherwise than by sale, or

(b)the disposal is to the Board in pursuance of section 230 of the 1984 Act F150... (acceptance of property in satisfaction of tax).

(3)Subsection (4) below shall have effect in respect of the disposal of any asset which is property which has been or could be designated under section 31 of the 1984 Act, being—

(a)a disposal by way of gift, including a gift in settlement, or

(b)a disposal of settled property by the trustee on an occasion when, under section 71(1), the trustee is deemed to dispose of and immediately reacquire settled property (other than any disposal on which by virtue of section 73 no chargeable gain or allowable loss accrues to the trustee),

if the requisite undertaking described in section 31 of the 1984 Act (maintenance, preservation and access) is given by such person as the Board think appropriate in the circumstances of the case.

(4)The person making a disposal to which subsection (3) above applies and the person acquiring the asset on the disposal shall be treated for all the purposes of this Act as if the asset was acquired from the one making the disposal for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal.

(5)If—

(a)there is a sale of the asset and inheritance tax is chargeable under section 32 of the 1984 Act (or would be chargeable if an inheritance tax undertaking as well as an undertaking under this section had been given), or

(b)the Board are satisfied that at any time during the period for which any such undertaking was given it has not been observed in a material respect,

the person selling that asset or, as the case may be, the owner of the asset shall be treated for the purposes of this Act as having sold the asset for a consideration equal to its market value, and, in the case of a failure to comply with the undertaking, having immediately reacquired it for a consideration equal to its market value.

(6)The period for which an undertaking under this section is given shall be until the person beneficially entitled to the asset dies or it is disposed of, whether by sale or gift or otherwise; and if the asset subject to the undertaking is disposed of—

(a)otherwise than on sale, and

(b)without a further undertaking being given under this section,

subsection (5) above shall apply as if the asset had been sold to an individual.

References in this subsection to a disposal shall be construed without regard to any provision of this Act under which an asset is deemed to be disposed of.

(7)Where under subsection (5) above a person is treated as having sold for a consideration equal to its market value any asset within section 31(1)(c), (d) or (e) of the 1984 Act, he shall also be treated as having sold and immediately reacquired for a consideration equal to its market value any asset associated with it; but the Board may direct that the preceding provisions of this subsection shall not have effect in any case in which it appears to them that the entity consisting of the asset and any assets associated with it has not been materially affected.

For the purposes of this subsection 2 or more assets are associated with each other if one of them is a building falling within section 31(1)(c) of the 1984 Act and the other or others such land or objects as, in relation to that building, fall within section 31(1)(d) or (e) of the 1984 Act.

(8)If in pursuance of subsection (5) above a person is treated as having on any occasion sold an asset and inheritance tax becomes chargeable on the same occasion, then, in determining the value of the asset for the purposes of that tax, an allowance shall be made for the capital gains tax chargeable on any chargeable gain accruing on that occasion.

[F151(8A)Section 35A of the 1984 Act (variation of undertakings) shall have effect in relation to an undertaking given under this section as it has effect in relation to an undertaking given under section 30 of that Act.]

(9)In this section “inheritance tax undertaking” means an undertaking under Chapter II of Part II or section 78 of, or Schedule 5 to, the 1984 Act.

259 Gifts to housing associations.U.K.

(1)Subsection (2) below shall apply where—

(a)a disposal of an estate or interest in land in the United Kingdom is made to a [F152relevant housing provider] otherwise than under a bargain at arm’s length, and

(b)a claim for relief under this section is made by the transferor and the [F153relevant housing provider].

(2)Section 17(1) shall not apply; but if the disposal is by way of gift or for a consideration not exceeding the sums allowable as a deduction under section 38, then—

(a)the disposal and acquisition shall be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal, and

(b)where, after the disposal, the estate or interest is disposed of by the [F154relevant housing provider], its acquisition by the person making the earlier disposal shall be treated for the purposes of this Act as the acquisition of the [F154relevant housing provider].

[F155(3)In this section “relevant housing provider” means—

(a)a non-profit registered provider of social housing,

(b)a registered social landlord within the meaning of Part 1 of the Housing Act 1996,

(c)a body registered in the register maintained under section 57 of the Housing (Scotland) Act 2001, or

(d)a registered housing association within the meaning of Part 2 of the Housing (Northern Ireland) Order 1992.]

(4)In subsection (2)(b) above the first reference to a disposal includes a disposal to which section 146A(2) of the 1979 Act applied where the association which acquired the estate or interest in land on that disposal disposes of it after the coming into force of this section.

260 Gifts on which inheritance tax is chargeable etc.U.K.

(1)If—

(a)an individual or the trustees of a settlement (“the transferor”) make a disposal within subsection (2) below of an asset,

(b)the asset is acquired by an individual or the trustees of a settlement (“the transferee”), and

(c)a claim for relief under this section is made by the transferor and the transferee or, where the trustees of a settlement are the transferee, by the transferor alone,

then, subject to subsection (6) below and [F156sections 169[F157, 169B, 169C] and 261], subsection (3) below shall apply in relation to the disposal.

(2)A disposal is within this subsection if it is made otherwise than under a bargain at arm’s length and—

(a)is a chargeable transfer within the meaning of the M10Inheritance Tax Act 1984 (or would be but for section 19 of that Act) and is not a potentially exempt transfer (within the meaning of that Act),

(b)is an exempt transfer by virtue of—

(i)section 24 of that Act (transfers to political parties),

F158(ii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(iii)section 27 of that Act (transfers to maintenance funds for historic buildings etc.), or

(iv)section 30 of that Act (transfers of designated property),

(c)is a disposition to which section 57A of that Act applies and by which the property disposed of becomes held on trusts of the kind referred to in subsection (1)(b) of that section (maintenance funds for historic buildings etc.),

(d)by virtue of subsection (4) of section 71 of that Act (accumulation and maintenance trusts) does not constitute an occasion on which inheritance tax is chargeable under that section,

[F159(da)by virtue of subsection (2) of section 71B of that Act (trusts for bereaved minors) does not constitute an occasion on which inheritance tax is chargeable under that section,

(db)by virtue of subsection (2) of section 71E of that Act (age 18-to-25 trusts) does not constitute an occasion on which inheritance tax is charged under that section,]

(e)by virtue of section 78(1) of that Act (transfers of works of art etc.) does not constitute an occasion on which tax is chargeable under Chapter III of Part III of that Act, or

(f)is a disposal of an asset comprised in a settlement where, as a result of the asset or part of it becoming comprised in another settlement, there is no charge, or a reduced charge, to inheritance tax by virtue of paragraph 9, 16 or 17 of Schedule 4 to that Act (transfers to maintenance funds for historic buildings etc.).

(3)Where this subsection applies in relation to a disposal—

(a)the amount of any chargeable gain which, apart from this section, would accrue to the transferor on the disposal, and

(b)the amount of the consideration for which, apart from this section, the transferee would be regarded for the purposes of capital gains tax as having acquired the asset in question,

shall each be reduced by an amount equal to the held-over gain on the disposal.

(4)Subject to subsection (5) below, the reference in subsection (3) above to the held-over gain on a disposal is a reference to the chargeable gain which would have accrued on that disposal apart from this section.

(5)In any case where—

(a)there is actual consideration (as opposed to the consideration equal to the market value which is deemed to be given by virtue of any provision of this Act) for a disposal in respect of which a claim for relief is made under this section, and

(b)that actual consideration exceeds the sums allowable as a deduction under section 38,

the held-over gain on the disposal shall be reduced by the excess referred to in paragraph (b) above F160... .

(6)Subsection (3) above does not apply in relation to a disposal of assets within section 115(1) on which a gain is deemed to accrue by virtue of section 116(10)(b).

F161(6A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F162(6B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)In the case of a disposal within subsection (2)(a) above [F163(whether or not subsection (3) above applies in relation to it)] there shall be allowed as a deduction in computing the chargeable gain accruing to the transferee on the disposal of the asset in question an amount equal to whichever is the lesser of—

(a)the inheritance tax attributable to the value of the asset; and

(b)the amount of the chargeable gain as computed apart from this subsection.

(8)Where an amount of inheritance tax is varied after it has been taken into account under subsection (7) above, all necessary adjustments shall be made, whether by the making of an assessment to capital gains tax or by the discharge or repayment of such tax.

(9)Where subsection (3) above applies in relation to a disposal which is deemed to occur by virtue of section 71(1) or 72(1), subsection (5) above shall not apply.

(10)Where a disposal is partly within subsection (2) above, or is a disposal within paragraph (f) of that subsection on which there is a reduced charge such as is mentioned in that paragraph, the preceding provisions of this section shall have effect in relation to an appropriate part of the disposal.

261 Section 260 relief: gifts to non-residents.U.K.

(1)Section 260(3) shall not apply where the transferee is neither resident nor ordinarily resident in the United Kingdom.

(2)Section 260(3) shall not apply where the transferee is an individual who—

(a)though resident or ordinarily resident in the United Kingdom, is regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom, and

(b)by virtue of the arrangements would not be liable in the United Kingdom to tax on a gain arising on a disposal of the asset occurring immediately after its acquisition.

[F164Know-how U.K.

261ADisposal of know-how as part of disposal of all or part of a tradeU.K.

(1)This section applies if—

(a)a person carrying on a trade receives consideration for the disposal of know-how which has been used in the trade, and

(b)the know-how is disposed of as part of the disposal of all or part of the trade.

(2)If, as a result of section 194 of ITTOIA 2005, the consideration is treated for income tax purposes as—

(a)a capital receipt for goodwill (in relation to the person disposing of the know-how), or

(b)a capital payment for goodwill (in relation to the person acquiring the know-how),

the consideration is treated for capital gains tax purposes in the same way.

(3)This section has effect as if it were contained in Chapter 14 of Part 2 of ITTOIA 2005.]

[F165Deduction of trading losses or post-cessation expenditure etcU.K.

261BTreating trade loss etc as CGT lossU.K.

(1)A person may make a claim under this section if—

(a)relief is available to the person under section 64 or 128 of ITA 2007 (trade or employment loss relief against general income) for a tax year in relation to an amount of loss, and

(b)the person makes a claim under that section for the amount to be deducted in calculating the person's net income for the tax year.

(2)A person may also make a claim under this section if—

(a)relief is available to the person as mentioned in subsection (1)(a) for a tax year in relation to an amount of loss, but

(b)the person's total income for the tax year is nil or does not include any income from which the amount can be deducted.

(3)A claim under this section is for determining so much of the amount of the loss (“the relevant amount”) as—

(a)is not deducted in calculating the person's net income for the tax year, and

(b)has not already been taken into account for the purposes of any relief for any other tax year or any year of assessment (whether under ITA 2007, this section or otherwise).

(4)When the relevant amount can no longer be varied—

(a)by the [F166tribunal] on appeal, or

(b)on the order of a court,

it is treated for the purposes of capital gains tax as an allowable loss accruing to the person in the year of assessment corresponding to the tax year.

(5)But so much of the relevant amount as exceeds the maximum amount (see section 261C) is not to be treated for the purposes of capital gains tax as an allowable loss.

(6)The excess may, however, be used in giving effect to any other loss relief under Part 4 of ITA 2007 (depending on the terms of the relief).

(7)The amount treated as an allowable loss under this section—

(a)is no longer to be regarded as an amount available for income tax relief, and

(b)is not to be deductible from chargeable gains accruing to a person in any year of assessment that begins after the person has permanently ceased to carry on the trade, profession, vocation, employment or office in which the loss was made.

(8)A claim under this section must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the loss was made in the trade, profession, vocation, employment or office.

(9)In this section “normal self-assessment filing date”, “tax year” and “total income” have the same meaning as in the Income Tax Acts (see section 989 of ITA 2007).

261CMeaning of “the maximum amount” for purposes of section 261BU.K.

(1)For the purposes of section 261B “the maximum amount” is the amount on which the person would be chargeable to capital gains tax for the year of assessment if—

(a)the provisions mentioned below were ignored, and

(b)no account were taken of the event mentioned below.

(2)The provisions are—

F167(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)section 3(1) (annual exempt amount), and

(c)section 261B.

(3)The event is any event—

(a)which occurs after the date on which the relevant amount (see section 261B(3)) can no longer be varied by the [F168tribunal] on appeal or on the order of a court, and

(b)in consequence of which the amount chargeable to capital gains tax is reduced as a result of an enactment relating to capital gains tax.

261DTreating excess post-cessation trade or property relief as CGT lossU.K.

(1)A person may make a claim under this section if—

(a)relief is available to the person under section 96 or 125 of ITA 2007 (post-cessation trade or property relief) for a tax year in relation to an amount, and

(b)the person makes a claim under that section to deduct the amount in calculating the person's net income for the tax year.

(2)A person may also make a claim under this section if—

(a)relief is available to the person as mentioned in subsection (1)(a) for a tax year in relation to an amount, but

(b)the person's total income for the tax year is nil.

(3)A claim under this section is for treating for the purposes of capital gains tax so much of the amount as is not deducted in calculating the person's net income for the tax year (“the relevant amount”) as an allowable loss accruing to the person in the year of assessment corresponding to the tax year.

(4)But so much of the relevant amount as exceeds the maximum amount (see section 261E) is not to be treated for the purposes of capital gains tax as an allowable loss.

(5)The relevant amount is no longer to be regarded as an amount available for income tax relief.

(6)A claim under this section must be made on or before the first anniversary of the normal self-assessment filing date for the tax year mentioned in subsection (1) or (2) (as the case may be).

(7)In this section “normal self-assessment filing date”, “tax year” and “total income” have the same meaning as in the Income Tax Acts (see section 989 of ITA 2007).

261EMeaning of “the maximum amount” for purposes of section 261DU.K.

(1)For the purposes of section 261D “the maximum amount” is the amount on which the person would be chargeable to capital gains tax for the year of assessment if the following were ignored.

(2)The matters to be ignored are—

(a)any allowable losses falling to be carried forward to that year from a previous year for the purposes of section 2(2),

(b)section 3(1) (annual exempt amount), and

(c)any relief under section 261B or 261D.]

[F169Repurchase price under reposU.K.

261FDeemed manufactured payments: effect on repurchase priceU.K.

(1)This section applies if —

(a)the repurchase price of UK shares, UK securities or overseas securities is treated by section 604(2), (4) or (5) of ITA 2007 (deemed increase in repurchase price: repos and options) as increased for the purposes of section 607 of that Act (treatment of price differences under repos),

(b)condition A or B is met, and

(c)section 263A does not apply.

(2)Condition A is that, as a result of the increase, there is no difference for the purposes of section 607 of that Act between the sale price and the repurchase price.

(3)Condition B is that, as a result of an exception in section 608 of that Act, section 607 of that Act does not apply.

(4)The deemed increase of the repurchase price also has effect for capital gains tax purposes.

(5)Expressions used in this section and in section 605 of ITA 2007 (deemed increase in repurchase price: other income tax purposes) have the same meanings in this section as in that section.]

[F170261GPrice differences under repos: effect on repurchase priceU.K.

(1)Subsections (2) and (3) apply if—

(a)section 607 of ITA 2007 (treatment of price differences under repos) applies,

(b)an amount is treated under that section as a payment of interest, and

(c)section 263A does not apply.

(2)If the repurchase price is more than the sale price, the repurchase price is treated for capital gains tax purposes as reduced by the amount of the payment of interest.

(3)If the sale price is more than the repurchase price, the repurchase price is treated for capital gains tax purposes as increased by the amount of the payment of interest.

(4)Expressions used in this section and in section 609 of ITA 2007 (additional income tax consequences of price differences under repos) have the same meanings in this section as in that section.]

[F171261HPower to modify section 261G in non-arm's length caseU.K.

(1)The Treasury may by regulations provide for section 261G to apply with modifications if the exception in section 608(2) of ITA 2007 (agreement not at arm's length) would otherwise prevent it from applying.

(2)Regulations under this section may make different provision for different cases.

(3)Regulations under this section may contain incidental, supplemental, consequential and transitional provision and savings.

(4)The incidental, supplemental, and consequential provision may include modifications of section 261F (deemed manufactured payments: effect on repurchase price).

(5)In this section “modifications” includes exceptions and omissions.

(6)Accordingly, the power in subsection (1) includes power to provide for any provision of section 261G not to apply in relation to the case mentioned in that subsection.]

Miscellaneous reliefs and exemptionsU.K.

262 Chattel exemption.U.K.

(1)Subject to this section a gain accruing on a disposal of an asset which is tangible movable property shall not be a chargeable gain if the amount or value of the consideration for the disposal does not exceed £6,000.

(2)Where the amount or value of the consideration for the disposal of an asset which is tangible movable property exceeds £6,000, there shall be excluded from any chargeable gain accruing on the disposal so much of it as exceeds five-thirds of the difference between—

(a)the amount or value of the consideration, and

(b)£6,000.

(3)Subsections (1) and (2) above shall not affect the amount of an allowable loss accruing on the disposal of an asset, but for the purposes of computing under this Act the amount of a loss accruing on the disposal of tangible movable property the consideration for the disposal shall, if less than £6,000, be deemed to be £6,000 and the losses which are allowable losses shall be restricted accordingly.

(4)If 2 or more assets which have formed part of a set of articles of any description all owned at one time by one person are disposed of by that person, and—

(a)to the same person, or

(b)to persons who are acting in concert or who are connected persons,

whether on the same or different occasions, the 2 or more transactions shall be treated as a single transaction disposing of a single asset, but with any necessary apportionments of the reductions in chargeable gains, and in allowable losses, under subsections (2) and (3) above.

(5)If the disposal is of a right or interest in or over tangible movable property—

(a)in the first instance subsections (1), (2) and (3) above shall be applied in relation to the asset as a whole, taking the consideration as including the market value of what remains undisposed of, in addition to the actual consideration,

(b)where the sum of the actual consideration and that market value exceeds £6,000, the part of any chargeable gain that is excluded from it under subsection (2) above shall be so much of the gain as exceeds five-thirds of the difference between that sum and £6,000 multiplied by the fraction equal to the actual consideration divided by the said sum, and

(c)where that sum is less than £6,000 any loss shall be restricted under subsection (3) above by deeming the consideration to be the actual consideration plus the said fraction of the difference between the said sum and £6,000.

(6)This section shall not apply—

(a)in relation 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, or

(b)in relation to a disposal of currency of any description.

263 Passenger vehicles.U.K.

A mechanically propelled road vehicle constructed or adapted for the carriage of passengers, except for a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used, shall not be a chargeable asset; and accordingly no chargeable gain or allowable loss shall accrue on its disposal.

[F172263AZARenewables obligation certificates for domestic microgenerationU.K.

(1)A gain accruing to an individual on a disposal of a renewables obligation certificate is not a chargeable gain if—

(a)the individual acquired the certificate in connection with the generation of electricity by a microgeneration system,

(b)the system is installed at or near domestic premises occupied by the individual, and

(c)the individual intends that the amount of electricity generated by it will not significantly exceed the amount of electricity consumed in those premises.

(2)In subsection (1)—

• “domestic premises” means premises used wholly or mainly as a separate private dwelling,

• “microgeneration system” has the same meaning as in section 4 of the Climate Change and Sustainable Energy Act 2006, and

• “renewables obligation certificate” means a certificate issued under section 32B of the Electricity Act 1989 or Article 54 of the Energy (Northern Ireland) Order 2003.]

[F173263ZAFormer employees: employment-related liabilitiesU.K.

(1)This section applies if—

(a)a deduction of the amount of one or more deductible payments may be made under section 555 of ITEPA 2003 (former employee entitled to deduction [F174in calculating net income] in respect of liabilities related to the former employment) [F175in calculating a former employee's net income] for a tax year, and

(b)the total amount which may be deducted exceeds [F176the remaining total income] for that year.

(2)In this section “excess relief” means the amount of the difference between—

(a)the total amount which may be deducted, and

(b)[F177the remaining total income].

[F178(2A)In this section “the remaining total income”, in relation to a tax year, means the former employee's total income for the tax year less reliefs already deducted for the tax year at Step 2 of the calculation in section 23 of ITA 2007 for the purpose of calculating the former employee's income tax liability.]

(3)The amount of the excess relief may be treated as an allowable loss accruing to the former employee for that tax year.

This subsection applies only if the former employee makes a claim for the purpose.

(4)But no relief is available under subsection (3) in respect of any amount of the excess relief that exceeds the maximum amount.

(5)For the purposes of this section the “maximum amount”, in relation to the excess relief for a tax year, means the amount on which the former employee would be chargeable to capital gains tax for that year if the following were disregarded—

(a)any relief available under this section,

(b)any allowable losses falling to be carried forward to that year from a previous year for the purposes of section 2(2),

(c)section 3(1) (the annual exempt amount),

(d)any relief [F179under section 261B] (deduction of trading losses), and

(e)any relief [F180under section 261D] (relief for post-cessation expenditure).

(6)A former employee may make a claim under subsection (3) and a claim under section 555(3) of ITEPA 2003 in the same notice.]