Taxation of Chargeable Gains Act 1992

[F1 3A Gains connected to avoidance or foreign activities etc U.K.

(1) A gain accruing to a company on the disposal of an asset is taken to be “connected to avoidance” unless it is shown that neither—

(a) the disposal of the asset by the company, nor

(b) the acquisition or holding of the asset by the company,

formed part of a scheme or arrangements of which the main purpose, or one of the main purposes, was avoidance of liability to capital gains tax or corporation tax.

(2) A gain is “connected to a foreign trade” if it accrues on the disposal of an asset used only—

(a) for the purposes of a trade carried on by the company wholly outside the United Kingdom, or

(b) for the purposes of the foreign part of a trade carried on by the company partly within, and partly outside, the United Kingdom,

and the reference here to the foreign part of a trade is to the part of the trade carried on outside the United Kingdom.

(3) For this purpose an asset is to be regarded as used only for the purposes of a trade carried on by the company wholly outside the United Kingdom if—

(a) the asset is accommodation, or an interest or right in accommodation, situated outside the United Kingdom, and

(b) the accommodation has for each relevant period been furnished holiday accommodation of which a person has made a commercial letting.

(4) Each of the following is a “relevant period”—

(a) the period of 12 months ending with the date of the disposal and each of the two preceding periods of 12 months, or

(b) if the company has beneficially owned the accommodation (or interest or right) for more than 36 months, the period of 12 months ending with the date of the disposal and each of the preceding periods of 12 months throughout which the company had that beneficial ownership.

(5) The reference in this section to the commercial letting of furnished holiday accommodation is to be read in accordance with Chapter 6 of Part 4 of CTA 2009, but as if—

(a) sections 266, 268 and 268A were omitted, and

(b) the reference to an accounting period in section 267(1) were to a relevant period.

(6) A gain accruing on the disposal of an asset is “connected to other economically significant foreign activities” if—

(a) the asset is used only for the purposes of activities carried on by the company wholly or mainly outside the United Kingdom,

(b) the activities consist of the provision of goods or services on a commercial basis, and

(c) the activities also satisfy the staff, premises and economic value test.

(7) Activities satisfy the staff, premises and economic value test if they involve—

(a) the use of employees, agents or contractors of the company in numbers, and with competence and authority, commensurate with the size and nature of the activities,

(b) the use of premises and equipment commensurate with the size and nature of the activities, and

(c) the addition of economic value by the company to the persons to whom the goods or services are provided commensurate with the size and nature of the activities.

(8) This section applies for the purposes of section 3(1)(b) and (c).]

Textual Amendments

F1 Pt. 1 substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 2