Taxation of Chargeable Gains Act 1992

39 Exclusion of expenditure by reference to tax on income. U.K.

(1) There shall be excluded from the sums allowable under section 38 as a deduction in the computation of the gain any expenditure allowable as a deduction in computing the [F1 profits] or losses of a trade, profession or vocation for the purposes of income tax or allowable as a deduction in computing any other income or profits or gains or losses for the purposes of the Income Tax Acts and any expenditure which, although not so allowable as a deduction in computing any losses, would be so allowable but for an insufficiency of income or profits or gains; and this subsection applies irrespective of whether effect is or would be given to the deduction in computing the amount of tax chargeable or by discharge or repayment of tax or in any other way.

(2) Without prejudice to the provisions of subsection (1) above, there shall be excluded from the sums allowable under section 38 as a deduction in the computation of the gain any expenditure which, if the assets, or all the assets to which the computation relates, were, and had at all times been, held or used as part of the fixed capital of a trade the [F1 profits] of which were (irrespective of whether the person making the disposal is a company or not) chargeable to income tax would be allowable as a deduction in computing the [F1 profits] or losses of the trade for the purposes of income tax.

(3) No account shall be taken of any relief under Chapter II of Part IV of the M1 Finance Act 1981 or under Schedule 5 to the M2 Finance Act 1983, in so far as it is not withdrawn and relates to shares issued before 19th March 1986, in determining whether any sums are excluded by virtue of subsection (1) or (2) above from the sums allowable as a deduction in the computation of gains or losses for the purposes of this Act.

[F2 (3A) This section is not to be taken as excluding, from the sums allowable under section 38 as a deduction in the computation of the gain, expenditure allowable as a deduction in computing a return on which income tax is charged under Chapter 2A of Part 4 of ITTOIA 2005 (disguised interest) (but see section 381D of that Act).]

[F3 (3B) This section is not to be taken as excluding, from the sums allowable under section 38 as a deduction in the computation of the gain, any expenditure in respect of which an allowance under Part 2A of CAA 2001 (structures and buildings allowances) is made.]

[F4 (4) If—

(a) because section [F5 517G(4) or (6) of ITA 2007 (transactions in land: the chargeable person) applies, an amount is charged to income tax as income of] a person other than the person (“A”) by whom the gain was realised, and

(b) the income tax has been paid,

for the purposes of this section the amount charged to that tax is regarded as having been charged as the income of A.]

[F6 (5) If—

(a) because section [F7 356OG(4) or (6) of CTA 2010 (transactions in land: the chargeable company) applies, an amount is charged to corporation tax as profits of a person other than] the person (“B”) by whom the gain was realised, and

(b) the corporation tax has been paid,

for the purposes of this section the amount charged to that tax is regarded as having been charged as the income of B.]

Textual Amendments

F1 Word in s. 39(1)(2) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3)(a), Sch. 7 para. 7

F2 S. 39(3A) inserted (with effect in accordance with Sch. 12 para. 18(1) of the amending Act) by Finance Act 2013 (c. 29), Sch. 12 para. 7

F3 S. 39(3B) inserted (5.7.2019) by The Capital Allowances (Structures and Buildings Allowances) Regulations 2019 (S.I. 2019/1087), regs. 1, 4(5)

F4 S. 39(4) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 300 (with Sch. 2)

F5 Words in s. 39(4)(a) substituted (with effect in accordance with s. 82 of the amending Act) by Finance Act 2016 (c. 24), s. 79(9) (with savings in 2017 c. 32, s. 39(1)(2))

F6 S. 39(5) inserted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 229 (with Sch. 2)

F7 Words in s. 39(5)(a) substituted (with effect in accordance with s. 81 of the amending Act) by Finance Act 2016 (c. 24), s. 77(8) (with savings in 2017 c. 32, s. 39(1)(2))

Modifications etc. (not altering text)

C1 S. 39 extended (27.7.1993 with effect for the years 1992-93 and subsequent years of assessment as mentioned in s. 184(3)) by 1993 c. 34, s. 176(2)(b), 184(3)

C2 S. 39 excluded (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 670(7), 1329(1) (with Sch. 2 Pts. 1, 2)

C3 S. 39 excluded (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 672(4), 1329(1) (with Sch. 2 Pts. 1, 2)

C4 S. 39 extended (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 1157(2), 1329(1) (with Sch. 2 Pts. 1, 2)

C5 S. 39(1) modified (22.7.2004) by Finance Act 2004 (c. 12), s. 133(5)(b)

Marginal Citations

M1 1981 c. 35.

M2 1983 c. 28.