Part I Capital gains tax and corporation tax on chargeable gains
Capital gains tax
2 Persons and gains chargeable to capital gains tax, and allowable losses.
(1)
Subject to any exceptions provided by this Act, and without prejudice to sections 10 and 276, a person shall be chargeable to capital gains tax in respect of chargeable gains accruing to him in a year of assessment during any part of which he is resident in the United Kingdom, or during which he is ordinarily resident in the United Kingdom.
(2)
Capital gains tax shall be charged on the total amount of chargeable gains accruing to the person chargeable in the year of assessment, after deducting—
(a)
any allowable losses accruing to that person in that year of assessment, and
(b)
so far as they have not been allowed as a deduction from chargeable gains accruing in any previous year of assessment, any allowable losses accruing to that person in any previous year of assessment (not earlier than the year 1965-66).
(3)
Except as provided by section 62, an allowable loss accruing in a year of assessment shall not be allowable as a deduction from chargeable gains accruing in any earlier year of assessment, and relief shall not be given under this Act more than once in respect of any loss or part of a loss, and shall not be given under this Act if and so far as relief has been or may be given in respect of it under the Income Tax Acts.
F1(4)
If chargeable gains are treated by virtue of section 87 or 89(2) as accruing to a person in a tax year (“the relevant deemed gains”)—
(a)
subsection (2) has effect as if the relevant deemed gains had not accrued, and
(b)
the amount on which the person is charged to capital gains tax for that year is the sum of—
(i)
the amount given by subsection (2) as it has effect by virtue of paragraph (a), and
(ii)
the amount of the relevant deemed gains.
(5)
In subsection (4) the reference to section 87 or 89(2) is to that section read, where appropriate, with section 10A.
F2(7)
Where in any year of assessment—
(a)
there are amounts treated as accruing to a person by virtue of section F3... 86,
(b)
two or more of those amounts, or elements of them—
(i)
relate to different settlements, F4...
F4(ii)
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(c)
losses are deductible from the amounts or elements mentioned in paragraph (b) above F5... but are not enough to exhaust them all,
F7(8)
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F82A Taper relief.
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3 Annual exempt amount.
(1)
An individual shall not be chargeable to capital gains tax in respect of so much of his taxable amount for any year of assessment as does not exceed the exempt amount for the year.
F9(1A)
Subsection (1) does not apply to an individual for a tax year if section 809B of ITA 2007 (claim for remittance basis to apply) applies to the individual for that year.
(2)
Subject to subsection (3) below, the exempt amount for any year of assessment shall be £5,500.
(3)
If the retail prices index for the month of F10September preceding a year of assessment is higher than it was for the previous F10September, then, unless Parliament otherwise determines, subsection (2) above shall have effect for that year as if for the amount specified in that subsection as it applied for the previous year (whether by virtue of this subsection or otherwise) there were substituted an amount arrived at by increasing the amount for the previous year by the same percentage as the percentage increase in the retail prices index and, if the result is not a multiple of £100, rounding it up to the nearest amount which is such a multiple.
(4)
The Treasury shall, before each year of assessment, make an order specifying the amount which by virtue of this section is the exempt amount for that year.
F11(5)
For the purposes of this section an individual’s taxable amount for any year of assessment is the amount F12which is (apart from this section) the amount for that year on which that individual is chargeable to capital gains tax in accordance with section 2.
(5A)
Where, in the case of any individual, the amount of the adjusted net gains for any year of assessment is equal to or less than the exempt amount for that year, no deduction shall be made for that year in respect of—
(a)
any allowable losses carried forward from a previous year; or
(b)
any allowable losses carried back from a subsequent year in which the individual dies.
(5B)
Where, in the case of any individual, the amount of the adjusted net gains for any year of assessment exceeds the exempt amount for the year, the deductions made for that year in respect of allowable losses falling within subsection (5A)(a) or (b) above shall not be greater than the excess.
(5C)
In subsections (5A) and (5B) above the references, in relation to any individual’s case, to the adjusted net gains for any year are references to the amount given in his case by—
(a)
taking the amount for that year from which the deductions for which section 2(2)(a) and (b) provides are to be made;
F13(aa)
if section 16ZB (certain chargeable gains charged on remittance basis) applies for that year, deducting the amount of the relevant gains (within the meaning of that section),
(b)
deducting F14(from the amount mentioned in paragraph (a), as reduced under paragraph (aa)) only the amounts falling to be deducted in accordance with section 2(2)(a); and
F17(6)
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(7)
For the year of assessment in which an individual dies and for the next 2 following years, F18subsections (1) to (5C) above shall apply to his personal representatives as they apply to an individual.
F19(7A)
As they apply by virtue of subsection (7) above—
(a)
subsection (5A) has effect with the omission of paragraph (b), and
(b)
subsection (5B) has effect with the omission of the words “or (b)”.
(8)
Schedule 1 shall have effect as respects the application of this section to trustees.
F203AReporting limits
(1)
Where in the case of an individual—
(a)
the amount of chargeable gains accruing to him in any year of assessment does not exceed the exempt amount for that year, and
(b)
the aggregate amount or value of the consideration for all chargeable disposals of assets made by him in that year does not exceed four times the exempt amount for that year,
a statement to that effect is sufficient compliance with so much of any notice under section 8 of the Management Act as requires information for the purposes of establishing the amount in which he is chargeable to capital gains tax for that year.
(2)
For the purposes of subsection (1)(a) above—
F21(a)
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(b)
the amount of chargeable gains accruing to an individual in a year of assessment for which F22a deduction falls to be made in respect of allowable losses is the amount before the deduction.
(3)
For the purposes of subsection (1)(b) above a “chargeable disposal” is any disposal other than—
(a)
a disposal on which any gain accruing is not a chargeable gain, or
(b)
a disposal the consideration for which is treated by virtue of section 58 F23(spouses and civil partners) as being such that neither a gain nor a loss would accrue.
(4)
Subsection (1) above applies to personal representatives (for the year of assessment in which the individual in question dies and for the next 2 following years) as it applies to an individual.
(5)
Subsection (1) above applies to the trustees of a settlement in accordance with Schedule 1.
F24(5A)
Subsection (1) does not apply to an individual for a tax year if—
(a)
section 809B of ITA 2007 (claim for remittance basis to apply), or
(b)
section 16ZB below (certain chargeable gains charged on remittance basis),
applies to the individual for that year.
(6)
In this section “exempt amount” has the meaning given by section 3 (read, where appropriate, with Schedule 1).
F254Rates of capital gains tax
(1)
This section makes provision about the rates at which capital gains tax is charged, but is subject to section 169N (rate in case of claim for entrepreneurs' relief).
(2)
Subject to the following provisions of this section, the rate of capital gains tax in respect of gains accruing to a person in a tax year is 18%.
(3)
The rate of capital gains tax in respect of gains accruing to—
(a)
the trustees of a settlement, or
(b)
the personal representatives of a deceased person,
in a tax year is 28%.
(4)
If income tax is chargeable at the higher rate or the dividend upper rate in respect of any part of the income of an individual for a tax year, the rate of capital gains tax in respect of gains accruing to the individual in the year is 28%.
(5)
If no income tax is chargeable at the higher rate or the dividend upper rate in respect of the income of an individual for a tax year, but the amount on which the individual is chargeable to capital gains tax exceeds the unused part of the individual's basic rate band, the rate of capital gains tax on the excess is 28%.
(6)
For the purposes of subsection (5), gains which are chargeable to capital gains tax at the rate in section 169N(3) are to be treated as forming the lowest part of the amount on which an individual is chargeable to capital gains tax.
(7)
The reference in subsection (5) to the unused part of an individual's basic rate band is a reference to the amount by which the basic rate limit exceeds the individual's Step 3 income.
(8)
For the purposes of this section, “the Step 3 income” of an individual means the individual's net income less allowances deducted at Step 3 of the calculation in section 23 of ITA 2007 for the purpose of calculating the individual's income tax liability.
(9)
Section 989 of ITA 2007 (the definitions) applies for the purposes of this section as it applies for income tax purposes.
F254ASection 4: special cases
(1)
Subsection (2) applies if for a tax year—
(a)
a person is entitled, by virtue of section 539 of ITTOIA 2005 (gains from contracts for life insurance etc), to relief by reference to the amount of a deficiency, or
(b)
the residuary income of an estate is treated, by virtue of section 669(1) and (2) of that Act (reduction in residuary income: inheritance tax on accrued income), as reduced so as to reduce a person's income by any amount for the purposes of extra liability.
(2)
Section 4(7) is to have effect as if the person's Step 3 income for the year were reduced by the amount of the deficiency mentioned in subsection (1)(a) or the amount mentioned in subsection (1)(b) (as the case may be).
(3)
Subsections (4) and (5) apply if, by virtue of section 465 of ITTOIA 2005 (gains from contracts for life insurance etc), a person's total income for a tax year is deemed to include any amount or amounts.
(4)
Section 4(7) is to have effect as if the person's Step 3 income for the year included not the whole of the amount or amounts concerned but only the annual equivalent within the meaning of section 536(1) of that Act or the total annual equivalent within the meaning of section 537 of that Act (as the case may be).
(5)
If—
(a)
relief is given under section 535 of that Act, and
(b)
the calculation under section 536(1) or 537 of that Act (as the case may be) does not involve the higher rate of income tax,
section 4(4) and (5) are to have effect as if no income tax were chargeable at the higher rate or the dividend upper rate in respect of the person's income.
F264BDeduction of losses etc in most beneficial way
(1)
This section applies if the gains accruing to a person in a tax year are (apart from this section) chargeable to capital gains tax at different rates.
(2)
Allowable losses may be deducted from those gains, and the exempt amount under section 3 may be used in respect of those gains, in such way as is most beneficial to that person.
(3)
Subsection (2) is subject to any enactment which contains a limitation on the gains from which allowable losses may be deducted.
F275 Accumulation and discretionary settlements.
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F286 Other special cases.
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F297 Time for payment of tax.
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