Capital Gains Tax Act 1979

PART II Reductions in Held-Over Gain

Application and interpretation

4 (1) The provisions of this Part of this Schedule apply in cases where a claim for relief is made under section 126 of this Act.

(2) In this Part of this Schedule—

(a) “the principal provision ” means section 126(1) of this Act, or, as the case may require, sub-paragraph (1) of paragraph 2 above,

(b) “shares ” includes securities,

(c) “the transferor ” and “the transferee ” have the same meaning as in section 126 of this Act, except that, in a case where paragraph 2 above applies, each of those expressions refers to the trustee mentioned in that paragraph, and

(d) “unrelieved gain ”, in relation to a disposal, has the same meaning as in section 126(6) of this Act.

(3) Any reference in this Part of this Schedule to a disposal of an asset is a reference to a disposal which falls within paragraph (a) of the principal provision and any reference to a disposal of shares is a reference to a disposal which falls within paragraph (b) of that provision.

(4) In relation to a disposal of an asset or of shares, any reference in the following provisions of this Part of this Schedule to the held-over gain is a reference to the held-over gain on that disposal as determined under subsection (5) or, as the case may be, subsection (6) of section 126 of this Act (taking account, where paragraph 2 above applies, of sub-paragraph (2)(b) of that paragraph).

Reductions peculiar to disposals of assets

5 If, in the case of a disposal of an asset, the asset was not used for the purposes of the trade, profession or vocation referred to in paragraph (a) of the principal provision throughout the period of its ownership by the transferor, the amount of the held-over gain shall be reduced by multiplying it by the fraction of which the denominator is the number of days in that period of ownership and the numerator is the number of days in that period during which the asset was so used.

6 If, in the case of a disposal of an asset, the asset is a building or structure and, over the period of its ownership by the transferor or any substantial part of that period, part of the building or structure was, and part was not, used for the purposes of the trade, profession or vocation referred to in paragraph (a) of the principal provision, there shall be determined the fraction of the unrelieved gain on the disposal which it is just and reasonable to apportion to the part of the asset which was so used, and the amount of the held-over gain (as reduced, if appropriate, under paragraph 5 above) shall be reduced by multiplying it by that fraction.

Reduction peculiar to disposal of shares

7 (1) if, in the case of a disposal of shares, the chargeable assets of the company whose shares are disposed of include assets which are not business assets, the amount of the held-over gain shall be reduced by multiplying it by the fraction of which the denominator is the market value of the whole of the company's chargeable assets on the date of the disposal and the numerator is the market value of the company's chargeable business assets on that date.

(2) For the purpose of this paragraph—

(a) an asset is a business asset in relation to a company if it is or is an interest in an asset used for the purposes of a trade, profession or vocation carried on by the company, and

(b) an asset is a chargeable asset in relation to a company at any time if, on a disposal of it at that time, a chargeable gain would accrue to the company.

Reduction where gain partly relieved by retirement relief

8 (1) If, in the case of a disposal of an asset—

(a) the disposal is of a chargeable business asset and is comprised in a disposal of the whole or part of a business in respect of gains accruing on which the transferor is entitled to relief under section 124 of this Act (transfer of business on retirement), and

(b) apart from this paragraph, the held-over gain on the disposal (as reduced, where appropriate, under the preceding provisions of this Part of this Schedule) would exceed the amount of the chargeable gain which, apart from section 126 of this Act, would accrue on the disposal,

the amount of that held-over gain shall be reduced by the amount of the excess.

(2) In sub-paragraph (1) above “chargeable business asset” has the same meaning as in section 124 of this Act.

(3) If, in the case of a disposal of shares,—

(a) the disposal is or forms part of a disposal of shares in respect of the gains accruing on which the transferor is entitled to relief under section 124 of this Act, and

(b) apart from this paragraph, the held-over gain on the disposal (as reduced, where appropriate, under paragraph 7 above) would exceed an amount equal to the relevant proportion of the chargeable gain which, apart from section 126 of this Act, would accrue on the disposal,

the amount of that held-over gain shall be reduced by the amount of the excess.

(4) In sub-paragraph (3) above “the relevant proportion”, in relation to a disposal falling within paragraph (a) of that sub-paragraph, means the proportion determined under subsection (5)(b) of section 124 of this Act in relation to the aggregate sum of the gains which accrue on that disposal.