Taxation of Chargeable Gains Act 1992

[F1 Special rule for disposal of pooled assets U.K.

Textual Amendments

F1 Sch. 7AA inserted (with effect in accordance with s. 137(5) of the amending Act) by Finance Act 1998 (c. 36), s. 137(2), Sch. 24

5 (1) This paragraph applies where— U.K.

(a) any holding of securities falls by virtue of any provision of Chapter I of Part IV to be treated as a single asset;

(b) one or more disposals of securities comprised in that holding is made by the relevant company in the gain period at or after the relevant entry time for that company; and

(c) an allowable loss accrues to the relevant company on that disposal or, as the case may be, on one or more of them.

(2) The extent to which any allowable loss falling within sub-paragraph (1)(c) above is to be treated for the purposes of paragraph 4(4) above as a loss accruing on the disposal of an asset held at any entry time for the relevant company shall be determined—

(a) by computing the notional net pre-entry loss accruing to the relevant company in the gain period;

(b) by setting allowable losses falling within sub-paragraph (1)(c) above against that notional net pre-entry loss in the order in which those losses accrued; and

(c) by treating the allowable loss as accruing on the disposal of an asset held at the entry time to the extent only that there is or remains an amount against which it can be set under paragraph (b) above.

(3) For the purposes of this paragraph the notional net pre-entry loss accruing to the relevant company in the gain period shall be determined—

(a) by computing all the chargeable gains and allowable losses that, on the relevant assumptions, would have accrued to the relevant company on the disposals falling within sub-paragraph (4) below;

(b) in a case where the aggregate amount of those gains is equal to or exceeds the aggregate amount of those losses, taking nil as the amount of the notional net pre-entry loss; and

(c) in any other case, taking the amount by which the aggregate of those losses exceeds the aggregate of those gains as the amount of the notional net pre-entry loss.

(4) A disposal falls within this sub-paragraph to the extent that—

(a) it is made by the relevant company in the gain period at or after the relevant entry time for that company; and

(b) on the relevant assumptions, it would be taken to be a disposal of securities that are pre-entry securities in relation to the relevant entry time for that company.

(5) For the purposes of this paragraph the relevant assumptions, in relation to any company, are—

(a) that securities which are pre-entry securities in relation to the relevant entry time for that company are not to be regarded as part of a single asset with any securities which are post-entry securities in relation to that time;

(b) that securities disposed of in the gain period at or after that time are identified with securities that are pre-entry securities in relation to that time, rather than with securities which are post-entry securities in relation to that time; and

(c) subject to paragraphs (a) and (b) above, that securities disposed of in the gain period are identified in accordance with the provisions applicable apart from paragraphs (a) and (b) above.

(6) For the purpose of applying the relevant assumptions in relation to any disposal of securities by the relevant company, it shall be further assumed—

(a) that the relevant assumptions applied to every previous disposal in the gain period of securities by one company to another company in the same group of companies;

(b) that (subject to paragraph (c) below) securities disposed of by one member of a group of companies to another member of that group retain the same status (as pre-entry securities or as post-entry securities) in relation to a particular time as they had before the disposal; and

(c) that securities acquired by the relevant company at or after the relevant entry time for that company are to be taken to be pre-entry securities in relation to that time only if they fall within sub-paragraph (7) below.

(7) Securities fall within this sub-paragraph if, on the relevant assumptions and the assumptions set out in sub-paragraph (6)(a) and (b) above, they fall to be identified with securities which—

(a) were held by the relevant company or any associated company of the relevant company at the time which is the relevant entry time for the relevant company; and

(b) have not, between that time and the time when they are disposed of by the relevant company, been disposed of otherwise than by a disposal made by one company in a group of companies to another company in the same group.

(8) Where anything is treated by virtue of section 127 as the same asset as any securities comprised in any holding of securities falling to be regarded as a single asset by virtue of any provision of Chapter I of Part IV, so much of that section as determines the time at which anything comprised in the asset is taken to have been acquired shall be disregarded in determining for the purposes of this paragraph whether securities comprised in the asset are pre-entry securities or post-entry securities.

(9) Subject to sub-paragraphs (6) to (8) above, in this paragraph—

• “associated company” means a company which—

  (a)

  at the time which is the relevant entry time in the case of the relevant company joined the group of companies that was also joined at that time by the relevant company; and

  (b)

  had been a member of the same group of companies as the relevant company immediately before that time;

• “entry time”, in relation to a company, means any time in the gain period at which the company joins a group of companies;

• “pre-entry securities”, in relation to an entry time, means such securities acquired by the company in question before that time as have not already been disposed of before that time;

• “post-entry securities”, in relation to an entry time, means securities acquired by the company in question at or after that time;

• “the relevant entry time” in relation to any company means—

  (a)

  if there is only one entry time for that company, that time; and

  (b)

  if there is more than one such time, the earlier or earliest such time.

• “securities” has the meaning given for the purposes of section 104 by subsection (3) of that section.]