Legalize / United Kingdom / Public General Act

Capital Gains Tax Act 1979 (repealed 6.3.1992)

Type Public General Act

Publication 1979-03-22

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(b) the taxation of development gains under Part III of the Finance Act 1974, which is to be terminated in accordance with the provisions of the Development Land Tax Act 1976,

(c) the extension of the taxation of chargeable gains by Chapter II of the said Part III (the first letting charge), subject to termination in accordance with the said Act of 1976.

PART VI — Property: Further Provisions

Replacement of business assets

Roll-over relief

115

(1) If the consideration which a person carrying on a trade obtains for the disposal of, or of his interest in, assets (in this section referred to as “the old assets”) used, and used only, for the purposes of the trade throughout the period of ownership is applied by him in acquiring other assets, or an interest in other assets (in this section referred to as “the new assets”) which on the acquisition are taken into use, and used only, for the purposes of the trade, and the old assets and new assets are within the classes of assets listed in section 118 below, then the person carrying on the trade shall, on making a claim as respects the consideration which has been so applied, be treated for the purposes of this Act—

(a) as if the consideration for the disposal of, or of the interest in, the old assets were (if otherwise of a greater amount or value) of such amount as would secure that on the disposal neither a gain nor a loss accrues to him, and

(b) as if the amount or value of the consideration for the acquisition of, or of the interest in, the new assets were reduced by the excess of the amount or value of the actual consideration for the disposal of, or of the interest in, the old assets over the amount of the consideration which he is treated as receiving under paragraph (a) above,

but neither paragraph (a) nor paragraph (b) above shall affect the treatment for the purposes of this Act of the other party to the transaction involving the old assets, or of the other party to the transaction involving the new assets.

(2) Where subsection (1)(a) above applies to exclude a gain which, in consequence of Schedule 5 to this Act, is not all chargeable gain, the amount of the reduction to be made under subsection (1)(b) above shall be the amount of the chargeable gain, and not the whole amount of the gain.

(3) This section shall only apply if the acquisition of, or of the interest in, the new assets takes place, or an unconditional contract for the acquisition is entered into, in the period beginning twelve months before and ending three years after the disposal of, or of the interest in, the old assets, or at such earlier or later time as the Board may by notice in writing allow:

Provided that, where an unconditional contract for the acquisition is so entered into, this section may be applied on a provisional basis without waiting to ascertain whether the new assets, or the interest in the new assets, is acquired in pursuance of the contract, and, when that fact is ascertained, all necessary adjustments shall be made by making assessments or by repayment or discharge of tax, and shall be so made notwithstanding any limitation on the time within which assessments may be made.

(4) This section shall not apply unless the acquisition of, or of the interest in, the new assets was made for the purpose of their use in the trade, and not wholly or partly for the purpose of realising a gain from the disposal of, or of the interest in, the new assets.

(5) If, over the period of ownership or any substantial part of the period of ownership, part of a building or structure is, and part is not, used for the purposes of a trade, this section shall apply as if the part so used, with any land occupied for purposes ancillary to the occupation and use of that part of the building or structure, were a separate asset, and subject to any necessary apportionments of consideration for an acquisition or disposal of, or of an interest in, the building or structure and other land.

(6) If the old assets were not used for the purposes of the trade throughout the period of ownership this section shall apply as if a part of the asset representing its use for the purposes of the trade having regard to the time and extent to which it was, and was not, used for those purposes, were a separate asset which had been wholly used for the purposes of the trade, and this subsection shall apply in relation to that part subject to any necessary apportionment of consideration for an acquisition or disposal of, or of the interest in, the asset.

(7) This section shall apply in relation to a person who, either successively or at the same time, carries on two or more trades as if both or all of them were a single trade.

(8) The provisions of this Act fixing the amount of the consideration deemed to be given for the acquisition or disposal of assets shall be applied before this section is applied.

(9) Without prejudice to section 43(4) above (general provision for apportionments), where consideration is given for the acquisition or disposal of assets some or part of which are assets in relation to which a claim under this section applies, and some or part of which are not, the consideration shall be apportioned in such manner as is just and reasonable.

Assets only partly replaced

116

(1) Section 115(1) above shall not apply if part only of the amount or value of the consideration for the disposal of, or of the interest in, the old assets is applied as described in that subsection, but if all of the amount or value of the consideration except for a part which is less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal of, or of the interest in, the old assets is so applied, then the person carrying on the trade, on making a claim as respects the consideration which has been so applied, shall be treated for the purposes of this Act—

(a) as if the amount of the gain so accruing were reduced to the amount of the said part (and, if not all chargeable gain, with a proportionate reduction in the amount of the chargeable gain), and

(b) as if the amount or value of the consideration for the acquisition of, or of the interest in, the new assets were reduced by the amount by which the gain is reduced (or as the case may be the amount by which the chargeable gain is proportionately reduced) under paragraph (a) of this subsection,

(2) Subsections (3) to (9) of section 115 above shall apply as if this section formed part of that section.

New assets which are depreciating assets

117

(1) Sections 115 and 116 above shall have effect subject to the provisions of this section in which—

(a) the “held over gain” means the amount by which, under those sections, and apart from the provisions of this section, any chargeable gain on one asset (called " asset No. 1 “) is reduced, with a corresponding reduction of the expenditure allowable in respect of another asset (called ” asset No. 2 "),

(b) any reference to a gain of any amount being carried forward to any asset is a reference to a reduction of that amount in a chargeable gain coupled with a reduction of the same amount in expenditure allowable in respect of that asset.

(2) If asset No. 2 is a depreciating asset, the held over gain shall not be carried forward, but the claimant shall be treated as if so much of the chargeable gain on asset No. 1 as is equal to the held over gain did not accrue until—

(a) the claimant disposes of asset No. 2, or

(b) he ceases to use asset No. 2 for the purposes of a trade carried on by him, or

whichever event comes first.

(3) If, in the circumstances specified in subsection (4) below, the claimant acquires an asset (called " asset No. 3 ") which is not a depreciating asset, and so claims under section 115 or 116 above—

(a) the gain held over from asset No. 1 shall be carried forward to asset No. 3, and

(b) the claim which applies to asset No. 2 shall be treated as withdrawn (so that subsection (2) above does not apply).

(4) The circumstances are that asset No. 3 is acquired not later than the time when the chargeable gain postponed under subsection (2) above would accrue and, assuming—

(a) that the consideration for asset No. 1 was applied in acquiring asset No. 3, and

(b) that the time between the disposal of asset No. 1 and the acquisition of asset No. 3 was within the time limited by section 115(3) above,

the whole amount of the postponed gain could be carried forward from asset No. 1 to asset No. 3; and the claim under subsection (3) above shall be accepted as if those assumptions were true.

(5) If part only of the postponed gain could be carried forward from asset No. 1 to asset No. 3, and the claimant so requires, that and the other part of the postponed gain shall be treated as derived from two separate assets, so that, on that claim—

(a) subsection (3) above applies to the first-mentioned part, and

(b) the other part remains subject to subsection (2) above.

(6) For the purposes of this section, an asset is a depreciating asset at any time if—

(a) at that time it is a wasting asset, as defined in section 37 above, or

(b) within the period of ten years beginning at that time it will become a wasting asset (so defined).

Relevant classes of assets

118

The classes of assets for the purposes of section 115 (1) above are as follows.

Class 1. Assets within heads A and B below. Head A Any building or part of a building and any permanent or semi-permanent structure in the nature of a building, occupied (as well as used) only for the purposes of the trade. Any land occupied (as well as used) only for the purposes of the trade. Head A has effect subject to section 119 below. Head B Fixed plant or machinery which does not form part of a building or of a permanent or semi-permanent structure in the nature of a building.

Class 2 Ships, aircraft and hovercraft (“hovercraft” having the same meaning as in the Hovercraft Act 1968).

Class 3 Goodwill.

Assets of Class 1

119

(1) This section has effect as respects head A of Class 1 in section 118 above.

(2) Head A shall not apply where the trade is a trade—

(a) of dealing in or developing land, or

(b) of providing services for the occupier of land in which the person carrying on the trade has an estate or interest.

(3) Where the trade is a trade of dealing in or developing land, but a profit on the sale of any land held for the purposes of the trade would not form part of the trading profits, then, as regards that land, the trade shall be treated for the purposes of subsection (2)(a) of this section as if it were not a trade of dealing in or developing land.

(4) A person who is a lessor of tied premises shall be treated as if he occupied (as well as used) those tied premises only for the purposes of the relevant trade.

This subsection shall be construed in accordance with section 140(2) of the Taxes Act (income tax and corporation tax on tied premises).

Trade carried on by family company: business assets dealt with by individual

120

In relation to a case where—

(a) the person disposing of, or of his interest in, the old assets and acquiring the new assets, or an interest in them, is an individual, and

(b) the trade or trades in question are carried on not by that individual but by a company which, both at the time of the disposal and at the time of the acquisition referred to in paragraph (a) above, is his family company, within the meaning of section 124 below,

any reference in sections 115 to 119 above to the person carrying on the trade (or the two or more trades) includes a reference to that individual.

Activities other than trades, and interpretation

121

(1) Sections 115 to 120 above shall apply with the necessary modifications—

(a) in relation to the discharge of the functions of a public authority, and

(b) in relation to the occupation of woodlands where the woodlands are managed by the occupier on a commercial basis and with a view to the realisation of profits, and

(d) in relation to such of the activities of a body of persons whose activities are carried on otherwise than for profit and are wholly or mainly directed to the protection or promotion of the interests of its members in the carrying on of their trade or profession as are so directed, and

(e) in relation to the activities of an unincorporated association or other body chargeable to corporation tax, being a body not established for profit whose activities are wholly or mainly carried on otherwise than for profit, but in the case of assets within head A of class 1 only if they are both occupied and used by the body, and in the case of other assets only if they are used by the body,

as they apply in relation to a trade.

(2) In sections 115 to 120 above and this section the expressions “trade”, “profession”, “vocation”, “office” and “employment” have the same meanings as in the Income Tax Acts, but not so as to apply the provisions of the Income Tax Acts as to the circumstances in which, on a change in the persons carrying on a trade, a trade is to be regarded as discontinued, or as set up and commenced.

(3) Sections 115 to 120 above, and this section, shall be construed as one.

Stock in trade

Appropriations to and from stock

122

(1) Subject to subsection (3) below, where an asset acquired by a person otherwise than as trading stock of a trade carried on by him is appropriated by him for the purposes of the trade as trading stock (whether on the commencement of the trade or otherwise) and, if he had then sold the asset for its market value, a chargeable gain or allowable loss would have accrued to him, he shall be treated as having thereby disposed of the asset by selling it for its then market value.

(2) If at any time an asset forming part of the trading stock of a person's trade is appropriated by him for any other purpose, or is retained by him on his ceasing to carry on the trade, he shall be treated as having acquired it at that time for a consideration equal to the amount brought into the accounts of the trade in respect of it for tax purposes on the appropriation or on his ceasing to carry on the trade, as the case may be.

(3) Subsection (1) above shall not apply in relation to a person's appropriation of an asset for the purposes of a trade if he is chargeable to income tax in respect of the profits of the trade under Case I of Schedule D, and elects that instead the market value of the asset at the time of the appropriation shall, in computing the profits of the trade for purposes of tax, be treated as reduced by the amount of the chargeable gain or increased by the amount of the allowable loss referred to in that subsection, and where that subsection does not apply by reason of such an election, the profits of the trade shall be computed accordingly:

Provided that if a person making an election under this subsection is at the time of the appropriation carrying on the trade in partnership with others, the election shall not have effect unless concurred in by the others.

Transfer of business to a company

Roll-over relief on transfer of business

123

(1) This section shall apply for the purposes of this Act where a person who is not a company transfers to a company a business as a going concern, together with the whole assets of the business, or together with the whole of those assets other than cash, and the business is so transferred wholly or partly in exchange for shares issued by the company to the person transferring the business.

Any shares so received by the transferor in exchange for the business are referred to below as “the new assets”.

(2) The amount determined under subsection (4) below shall be deducted from the aggregate (referred to below as “the amount of the gain on the old assets”) of the chargeable gains less allowable losses.

(3) For the purpose of computing any chargeable gain accruing on the disposal of any new asset—

(a) the amount determined under subsection (4) below shall be apportioned between the new assets as a whole, and

(b) the sums allowable as a deduction under section 32 (1)(a) above shall be reduced by the amount apportioned to the new asset under paragraph (a) above;

and if the shares which comprise the new assets are not all of the same class, the apportionment between the shares under paragraph (a) above shall be in accordance with their market values at the time they were acquired by the transferor.

(4) The amount referred to in subsections (2) and (3)(a) above shall not exceed the cost of the new assets but, subject to that,

the said amount shall be a fraction $AB$ of the amount of the gain on the old assets where—

“A ” is the cost of the new assets, and

“B ” is the value of the whole of the consideration received by the transfer or in exchange for the business;

and for the purposes of this subsection “the cost of the new assets” means any sums which would be allowable as a deduction under section 32(1)(a) above if the new assets were disposed of as a whole in circumstances giving rise to a chargeable gain.

(5) References in this section to the business, in relation to shares or consideration received in exchange for the business, include references to such assets of the business as are referred to in subsection (1) above.

Transfer of business on retirement

Relief on transfer

124

(1) If an individual who has attained the age of 60 years—

(a) disposes by way of sale or gift of the whole or part of a business, or

(b) disposes by way of sale or gift of shares or securities of a company,

and throughout a period of at least one year ending with the disposal the relevant conditions have been fulfilled, relief shall be given under this section in respect of gains accruing to him on the disposal.

(2) For the purposes of subsection (1) above the relevant conditions are fulfilled at any time if at that time,—

(a) in the case of a disposal falling within paragraph (a) of that subsection, the business in question is owned either by the individual or by a company with respect to which the following conditions are at that time fulfilled, namely,—

(i) it is a trading company,

(ii) it is the individual's family company, and

(iii) he is a full-time working director of it;

and

(b) in the case of a disposal falling within paragraph (b) of that subsection, either the conditions in sub-paragraphs (i) to (iii) of paragraph (a) above are fulfilled with respect to the company in question or the individual owns the business which, at the time of the disposal, is owned by the company;

and in relation to a particular disposal the period, up to a maximum of 10 years, which ends with the disposal and throughout which the relevant conditions are fulfilled is in this section referred to as “the qualifying period”.

(3) The amount available for relief under this section shall be—

(a) in the case of an individual who has attained the age of 65 years, the relevant percentage of £50,000, and

(b) in the case of an individual who has not attained that age, the relevant percentage of the aggregate of £10,000 for every year by which his age exceeds 60 and a corresponding part of £10,000 for any odd part of a year;

and for the purpose of this subsection “the relevant percentage” means a percentage determined according to the length of the qualifying period on a scale rising arithmetically from 10 per cent. where that period is precisely one year to 100 per cent. where it is ten years.

(4) Where subsection (1)(a) above applies the gains accruing to the individual on the disposal of chargeable business assets comprised in the disposal by way of sale or gift shall be aggregated, and only so much of that aggregate as exceeds the amount available for relief under this section shall be chargeable gains (but not so as to affect liability in respect of gains accruing on the disposal of assets other than chargeable business assets).

(5) Where subsection (1)(b) above applies—

(a) the gains which accrue to the individual on the disposal of the shares or securities shall be aggregated, and

(b) of a proportion of that aggregate sum which is equal to the proportion which the part of the value of the company's chargeable assets at the time of the disposal which is attributable to the value of the company's chargeable business assets bears to the whole of that value, only so much as exceeds the amount available for relief under this section shall constitute chargeable gains (but not so as to affect liability in respect of gains representing the balance of the said aggregate sum),

and for the purposes of paragraph (b) above every asset is a chargeable asset except one, on the disposal of which by the company at the time of the disposal of the shares or securities, no chargeable gain would accrue.

(6) So far as the amount available for relief under this section is applied in giving relief to an individual as respects a disposal it shall not be applied in giving relief to that individual as respects any other disposal (and the relief shall be applied in the order in which any disposals take place).

(7) In arriving at the aggregate under subsection (4) or subsection (5) above—

(a) the respective amounts of the gains shall be computed in accordance with the provisions of this Act (other than this section) fixing the amount of chargeable gains, and

(b) any allowable loss which accrues on the disposal shall be deducted,

and the provisions of this section shall not affect the computation of the amount of any allowable loss.

(8) In this section—

“chargeable business asset” means an asset (including goodwill but not including shares or securities or other assets held as investments) which is, or is an interest in, an asset used for the purposes of a trade, profession, vocation, office or employment carried on by the individual, or as the case may be by the individual's family company, other than an asset on the disposal of which no chargeable gain accrues or (where the disposal is of shares or securities in the family company) on the disposal of which no chargeable gain would accrue if the family company disposed of the asset at the time of the disposal of the shares or securities,

“family company” means, in relation to an individual, a company the voting rights in which are— as to not less than 25 per cent., exercisable by the individual, or as to not less than 51 per cent., exercisable by the individual or a member of his family, and, as to not less than 5 per cent., exercisable by the individual himself,

“family” means, in relation to an individual, the husband or wife of the individual, and a relative of the individual or the individual's husband or wife, and “relative” means brother, sister, ancestor or lineal descendant,

“full time working director” means a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity,

“trade”, “profession”, “vocation”, “office” and “employment” have the same meanings as in the Income Tax Acts,

“trading company” has the meaning given by paragraph 11 of Schedule 16 to the Finance Act 1972 ; and in this section references to the disposal of the whole or part of a business include references to the disposal of the whole or part of the assets provided or held for the purposes of an office or employment by the person exercising that office or employment.

Transfer by way of capital distribution from family company

125

(1) Subject to subsection (2) below, section 124(1)(b) above shall apply where under section 72 above (distribution which is not a new holding) the individual is treated as disposing of interests in shares or securities of a company in consideration of a capital distribution from the company in the course of dissolving or winding up the company as it applies where he disposes of shares or securities of a company by way of sale or gift.

(2) Subsection (1) above shall not apply if the capital distribution consists wholly of chargeable business assets of the company, and if it consists partly of chargeable business assets (and partly of money or money's worth), relief shall only be given under section 124 above in respect of that proportion of the gains accruing on the disposal which the part of the capital distribution not consisting of chargeable business assets bears to the entire capital distribution.

Gifts of business assets

Relief for gifts of business assets

126

(1) If an individual (in this section referred to as “the transferor”) makes a disposal, otherwise than under a bargain at arm's length, to a person resident or ordinarily resident in the United Kingdom (in this section referred to as “the transferee”) of—

(a) an asset which is, or is an interest in, an asset used for the purposes of a trade, profession or vocation carried on by the transferor or by a company which is his family company, or

(b) shares or securities of a trading company which is the transferor's family company,

then, subject to subsection (2) below, the provisions of subsection (3) below shall apply in relation to the disposal if a claim for relief under this section is made by the transferor and the transferee.

(2) Subsection (3) below does not apply in relation to a disposal if—

(a) in the case of a disposal of an asset, any gain accruing to the transferor on the disposal is (apart from this section) wholly relieved under section 124 above, or

(b) in the case of a disposal of shares or securities, the proportion determined under subsection (5)(b) of section 124 above of any gain accruing to the transferor on the disposal is (apart from this section) wholly relieved under that section.

(3) Where a claim for relief is made under this section in respect of a disposal—

(a) the amount of any chargeable gain which, apart from this section, would accrue to the transferor on the disposal, and

(b) the amount of the consideration for which, apart from this section, the transferee would be regarded for the purposes of capital gains tax as having acquired the asset or, as the case may be, the shares or securities,

shall each be reduced by an amount equal to the held-over gain on the disposal.

(4) Part I of Schedule 4 to this Act shall have effect for extending the relief provided for by virtue of subsections (1) to (3) above in the case of agricultural property and for applying it in relation to settled property.

(5) Subject to Part II of Schedule 4 to this Act (which provides for reductions in the held-over gain in certain cases) and subsection (6) below, the reference in subsection (3) above to the held-over gain on a disposal is a reference to the chargeable gain which would have accrued on that disposal apart from subsection (3) above and (in appropriate cases) section 124 above, and in subsection (6) below that chargeable gain is referred to as the unrelieved gain on the disposal.

(6) In any case where—

(a) there is actual consideration (as opposed to the consideration equal to the market value which is deemed to be given by virtue of section 19(3) above) for a disposal in respect of which a claim for relief is made under this section, and

(b) that actual consideration exceeds the sums allowable as a deduction under section 32 above,

the held-over gain on the disposal shall be the amount by which the unrelieved gain on the disposal exceeds the excess referred to in paragraph (b) above.

(7) Subject to subsection (8) below, in this section and Schedule 4 to this Act—

(a) “family company” has the meaning given by section 124(8) above,

(b) “trading company” has the meaning given by paragraph 11 of Schedule 16 to the Finance Act 1972, and

(8) In this section and Schedule 4 to this Act and in determining whether a company is a trading company for the purposes of this section and that Schedule, the expression “trade ” shall be taken to include the occupation of woodlands where the woodlands are managed by the occupier on a commercial basis and with a view to the realisation of profits.

Movable property

Wasting assets

127

(1) Subject to the provisions of this section, no chargeable gain shall accrue on the disposal of, or of an interest in, an asset which is tangible movable property and which is a wasting asset.

(2) Subsection (1) above shall not apply to a disposal of, or of an interest in, an asset:—

(a) if, from the beginning of the period of ownership of the person making the disposal to the time when the disposal is made, the asset has been used and used solely for the purposes of a trade, profession or vocation and if that person has claimed or could have claimed any capital allowance in respect of any expenditure attributable to the asset or interest under paragraph (a) or paragraph (b) of section 32(1) above (allowable expenditure), or

(b) if the person making the disposal has incurred any expenditure on the asset or interest which has otherwise qualified in full for any capital allowance.

(3) In the case of the disposal of, or of an interest in, an asset which, in the period of ownership of the person making the disposal, has been used partly for the purposes of a trade, profession or vocation and partly for other purposes, or has been used for the purposes of a trade, profession or vocation for part of that period, or which has otherwise qualified in part only for capital allowances—

(a) the consideration for the disposal, and any expenditure attributable to the asset or interest by virtue of section 32(1)(a) and (b) above, shall be apportioned by reference to the extent to which that expenditure qualified for capital allowances, and

(b) the computation under Chapter II of Part II above shall be made separately in relation to the apportioned parts of the expenditure and consideration, and

(c) subsection (1) above shall not apply to any gain accruing by reference to the computation in relation to the part of the consideration apportioned to use for the purposes of the trade, profession or vocation, or to the expenditure qualifying for capital allowances.

(4) Subsection (1) above shall not apply to a disposal of commodities of any description by a person dealing on a terminal market or dealing with or through a person ordinarily engaged in dealing on a terminal market.

(5) This section shall be construed as one with Chapter II of Part II above.

Chattel exemption

128

(1) Subject to this section a gain accruing on a disposal of an asset which is tangible movable property shall not be a chargeable gain if the amount or value of the consideration for the disposal does not exceed £2,000.

(2) Where the amount or value of the consideration for the disposal of an asset which is tangible movable property exceeds £2,000, there shall be excluded from any chargeable gain accruing on the disposal so much of it as exceeds five-thirds of the difference between—

(a) the amount or value of the consideration, and

(b) £2,000.

(3) Subsections (1) and (2) above shall not affect the amount of an allowable loss accruing on the disposal of an asset, but for the purposes of computing under this Act the amount of a loss accruing on the disposal of tangible movable property the consideration for the disposal shall, if less than £2,000, be deemed to be £2,000 and the losses which are allowable losses shall be restricted accordingly.

(4) If two or more assets which have formed part of a set of articles of any description all owned at one time by one person are disposed of by that person, and—

(a) to the same person, or

(b) to persons who are acting in concert or who are connected persons,

whether on the same or different occasions, the two or more transactions shall be treated as a single transaction disposing of a single asset, but with any necessary apportionments of the reductions in chargeable gains, and in allowable losses, under subsections (2) and (3) above.

(5) If the disposal is of a right or interest in or over tangible movable property—

(a) in the first instance subsections (1), (2) and (3) above shall be applied in relation to the asset as a whole, taking the consideration as including the market value of what remains undisposed of, in addition to the actual consideration,

(b) where the sum of the actual consideration and that market value exceeds £2,000, the part of any chargeable gain that is excluded from it under subsection (2) above shall be so much of the gain as exceeds five-thirds of the difference between that sum and £2,000 multiplied by the fraction equal to the actual consideration divided by the said sum, and

(c) where that sum is less than £2,000 any loss shall be restricted under subsection (3) above by deeming the consideration to be the actual consideration plus the said fraction of the difference between the said sum and £2,000.

(6) This section shall not apply—

(a) in relation to a disposal of commodities of any description by a person dealing on a terminal market or dealing with or through a person ordinarily engaged in dealing on a terminal market, or

(b) in relation to a disposal of currency of any description.

Leases of property other than land

129

Schedule 3 to this Act has effect, to the extent specified in paragraph 9 of that Schedule, as respects leases of property other than land.

Passenger vehicles

130

A mechanically propelled road vehicle constructed or adapted for the carriage of passengers, except for a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used, shall not be a chargeable asset; and accordingly no chargeable gain or allowable loss shall accrue on its disposal.

Decorations for valour or gallant conduct

131

A gain shall not be a chargeable gain if accruing on the disposal by any person of a decoration awarded for valour or gallant conduct which he acquired otherwise than for consideration in money or money's worth.

Other property

Commodities and other assets without earmark

132

Sections 65 and 66 above (rules of identification), and paragraph 13 of Schedule 5 to this Act (assets held on 6th April 1965) have effect, to the extent there specified, as respects assets dealt with without identifying the particular assets disposed of or acquired.

Foreign currency for personal expenditure

133

A gain shall not be a chargeable gain if accruing on the disposal by an individual of currency of any description acquired by him for the personal expenditure outside the United Kingdom of himself or his family or dependants (including expenditure on the provision or maintenance of any residence outside the United Kingdom).

Debts

134

(1) Where a person incurs a debt to another, whether in sterling or in some other currency, no chargeable gain shall accrue to that (that is the original) creditor or his personal representative or legatee on a disposal of the debt, except in the case of the debt on a security (as denned in section 82 above).

(2) Subject to the provisions of sections 82 and 85 above (conversion of securities and company amalgamations), and subject to subsection (1) above, the satisfaction of a debt or part of it (including a debt on a security as defined in section 82 above) shall be treated as a disposal of the debt or of that part by the creditor made at the time when the debt or that part is satisfied.

(3) Where property is acquired by a creditor in satisfaction of his debt or part of it, then subject to the provisions of sections 82 and 85 above the property shall not be treated as disposed of by the debtor or acquired by the creditor for a consideration greater than its market value at the time of the creditor's acquisition of it; but if under subsection (1) above (and in a case not falling within either of the said sections 82 and 85) no chargeable gain is to accrue on a disposal of the debt by the creditor (that is the original creditor), and a chargeable gain accrues to him on a disposal by him of the property, the amount of the chargeable gain shall (where necessary) be reduced so as not to exceed the chargeable gain which would have accrued if he had acquired the property for a consideration equal to the amount of the debt or that part of it.

(4) A loss accruing on the disposal of a debt acquired by the person making the disposal from the original creditor or his personal representative or legatee at a time when the creditor or his personal representative or legatee is a person connected with the person making the disposal, and so acquired either directly or by one or more purchases through persons all of whom are connected with the person making the disposal, shall not be an allowable loss.

(5) Where the original creditor is a trustee and the debt, when created, is settled property, subsections (1) and (4) above shall apply as if for the references to the original creditor's personal representative or legatee there were substituted references to any person becoming absolutely entitled, as against the trustee, to the debt on its ceasing to be settled property, and to that person's personal representative or legatee.

Debts: foreign currency bank accounts

135

(1) Subject to subsection (2) below, section 134(1) above shall not apply to a debt owed by a bank which is not in sterling and which is represented by a sum standing to the credit of a person in an account in the bank.

(2) Subsection (1) above shall not apply to a sum in an individual's bank account representing currency acquired by the holder for the personal expenditure outside the United Kingdom of himself or his family or dependants (including expenditure on the provision or maintenance of any residence outside the United Kingdom).

Relief in respect of loans to traders

136

(1) In this section “a qualifying loan” means a loan in the case of which—

(a) the money lent is used by the borrower wholly for the purposes of a trade carried on by him, not being a trade which consists of or includes the lending of money, and

(b) the borrower is resident in the United Kingdom, and

and for the purposes of paragraph (a) above money used by the borrower for setting up a trade which is subsequently carried on by him shall be treated as used for the purposes of that trade.

(2) In subsection (1) above references to a trade include references to a profession or vocation; and where money lent to a company is lent by it to another company in the same group, being a trading company, that subsection shall apply to the money lent to the first-mentioned company as if it had used it for any purpose for which it is used by the other company while a member of the group.

(3) If, on a claim by a person who has made a qualifying loan, the inspector is satisfied that—

(a) any outstanding amount of the principal of the loan has become irrecoverable, and

(b) the claimant has not assigned his right to recover that amount, and

(c) the claimant and the borrower were not each other's spouses, or companies in the same group, when the loan was made or at any subsequent time,

this Act shall have effect as if an allowable loss equal to that amount had accrued to the claimant when the claim was made.

(4) If, on a claim by a person who has guaranteed the repayment of a loan which is, or but for subsection (1)(c) above would be, a qualifying loan, the inspector is satisfied that—

(a) any outstanding amount of, or of interest in respect of, the principal of the loan has become irrecoverable from the borrower, and

(b) the claimant has made a payment under the guarantee (whether to the lender or a co-guarantor) in respect of that amount, and

(c) the claimant has not assigned any right to recover that amount which has accrued to him (whether by operation of law or otherwise) in consequence of his having made the payment, and

(d) the lender and the borrower were not each other's spouses, or companies in the same group, when the loan was made or at any subsequent time and the claimant and the borrower were not each other's spouses, and the claimant and the lender were not companies in the same group, when the guarantee was given or at any subsequent time,

this Act shall have effect as if an allowable loss had accrued to the claimant when the payment was made; and the loss shall be equal to the payment made by him in respect of the amount mentioned in paragraph (a) above less any contribution payable to him by any co-guarantor in respect of the payment so made.

(5) Where an allowable loss has been treated under subsection (3) or (4) above as accruing to any person and the whole or any part of the outstanding amount mentioned in subsection (3)(a) or, as the case may be, subsection (4)(a) is at any time recovered by him, this Act shall have effect as if there had accrued to him at that time a chargeable gain equal to so much of the allowable loss as corresponds to the amount recovered.

(6) For the purposes of subsection (5) above, a person shall be treated as recovering an amount if he (or any other person by his direction) receives any money or money's worth in satisfaction of his right to recover that amount or in consideration of his assignment of the right to recover it; and where a person assigns such a right otherwise than by way of a bargain made at arm's length he shall be treated as receiving money or money's worth equal to the market value of the right at the time of the assignment.

(7) No amount shall be treated under this section as giving rise to an allowable loss or chargeable gain in the case of any person if it falls to be taken into account in computing his income for the purposes of income tax or corporation tax.

(8) Where an allowable loss has been treated as accruing to a person under subsection (4) above by virtue of a payment made by him at any time under a guarantee—

(a) no chargeable gain shall accrue to him otherwise than under subsection (5) above, and

(b) no allowable loss shall accrue to him under this Act,

on his disposal of any rights that have accrued to him (whether by operation of law or otherwise) in consequence of his having made any payment under the guarantee at or after that time.

(9) References in this section to an amount having become irrecoverable do not include references to cases where the amount has become irrecoverable in consequence of the terms of the loan, of any arrangements of which the loan forms part, or of any act or omission by the lender or, in a case within subsection (4) above, the guarantor.

(10) In this section—

(a) “spouses” means spouses who are living together (construed in accordance with section 155(2) below),

(b) “trading company” has the meaning given by paragraph 11 of Schedule 16 to the Finance Act 1972, and

(11) Subsection (3) above applies where the loan is made after 11th April 1978 and subsection (4) above applies where the guarantee is given after that date.

Options and forfeited deposits

137

(1) Without prejudice to section 19 above (general provisions about the disposal of assets), the grant of an option, and in particular—

(a) the grant of an option in a case where the grantor binds himself to sell what he does not own, and because the option is abandoned, never has occasion to own, and

(b) the grant of an option in a case where the grantor binds himself to buy what, because the option is abandoned, he does not acquire,

is the disposal of an asset (namely of the option), but subject to the following provisions of this section as to treating the grant of an option as part of a larger transaction.

(2) If an option is exercised the grant of the option and the transaction entered into by the grantor in fulfilment of his obligations under the option shall be treated as a single transaction and accordingly—

(a) if the option binds the grantor to sell, the consideration for the option is part of the consideration for the sale, and

(b) if the option binds the grantor to buy, the consideration for the option shall be deducted from the cost of acquisition incurred by the grantor in buying in pursuance of his obligations under the option.

(3) The exercise of an option by the person for the time being entitled to exercise it shall not constitute the disposal of an asset by that person, but, if an option is exercised then the acquisition of the option (whether directly from the grantor or not) and the transaction entered into by the person exercising the option in exercise of his rights under the option shall be treated as a single transaction and accordingly—

(a) if the option binds the grantor to sell, the cost of acquiring the option shall be part of the cost of acquiring what is sold, and

(b) if the option binds the grantor to buy, the cost of the option shall be treated as a cost incidental to the disposal of what is bought by the grantor of the option.

(4) The abandonment of—

(a) a quoted option to subscribe for shares in a company, or

(b) an option to acquire assets exercisable by a person intending to use them, if acquired, for the purpose of a trade carried on by him,

shall constitute the disposal of an asset (namely of the option); but the abandonment of any other option by the person for the time being entitled to exercise it shall not constitute the disposal of an asset by that person.

(5) In the case of an option relating to shares or securities this section shall apply subject to the provisions of section 65 above (rules for identification: pooling) and, accordingly, the option may be regarded, in relation to the grantor or in relation to the person entitled to exercise the option, as relating to part of a holding (as defined in section 65 above) of shares or securities.

(6) This section shall apply in relation to an option binding the grantor both to sell and to buy as if it were two separate options with half the consideration attributed to each.

(7) In this section references to an option include references to an option binding the grantor to grant a lease for a premium or enter into any other transaction which is not a sale, and references to buying and selling in pursuance of an option shall be construed accordingly.

(8) This section shall apply in relation to a forfeited deposit of purchase money or other consideration money for a prospective purchase or other transaction which is abandoned as it applies in relation to the consideration for an option which binds the grantor to sell and which is not exercised.

(9) In subsection (4)(a) above, and in sections 138 and 139 below, “quoted option” means an option of a kind which, at the time of the abandonment or other disposal, is quoted on a recognised stock exchange within the meaning of section 535 of the Taxes Act, and there dealt in the same manner as shares.

Options: application of rules as to wasting assets

138

(1) Section 38 above (wasting assets: restriction of allowable expenditure) shall not apply—

(a) to a quoted option to subscribe for shares in a company, or

(b) to an option to acquire assets exercisable by a person intending to use them, if acquired, for the purpose of a trade carried on by him.

(2) In relation to the disposal by way of transfer of an option (other than a quoted option to subscribe for shares in a company) binding the grantor to sell or buy quoted shares or securities, the option shall be regarded as a wasting asset the life of which ends when the right to exercise the option ends, or when the option becomes valueless, whichever is the earlier.

Subsections (6) and (7) of section 137 above shall apply in relation to this subsection as they apply in relation to that section.

(3) The preceding provisions of this section are without prejudice to the application of sections 37 to 39 above (wasting assets) to options not within those provisions.

(4) In this section—

(a) “quoted option” has the meaning given by section 137(9) above,

(b) “quoted shares or securities” means shares or securities which have a quoted market value on a recognised stock exchange in the United Kingdom or elsewhere.

Quoted options treated as part of new holdings

139

(1) if a quoted option to subscribe for shares in a company is dealt in (on the stock exchange where it is quoted) within three months after the taking effect, with respect to the company granting the option, of any reorganisation, reduction, conversion or amalgamation to which Chapter II of Part IV above applies, or within such longer period as the Board may by notice in writing allow—

(a) the option shall, for the purposes of the said Chapter II (under which a holding prior to the reorganisation or reduction of capital, conversion or amalgamation is to be treated as the same as the resulting new holding) be regarded as the shares which could be acquired by exercising the option, and

(b) section 150(3) below shall apply for determining its market value.

(2) In this section “quoted option” has the meaning given by section 137(9) above.

PART VII — Other Provisions

Insurance

Policies of insurance

140

(1) The rights of the insurer under any policy of insurance shall not constitute an asset on the disposal of which a gain may accrue, whether the risks insured relate to property or not; and the rights of the insured under any policy of insurance of the risk of any kind of damage to, or the loss or depreciation of, assets shall constitute an asset on the disposal of which a gain may accrue only to the extent that those rights relate to assets on the disposal of which a gain may accrue or might have accrued.

(2) Notwithstanding subsection (1) above, sums received under a policy of insurance of the risk of any kind of damage to, or the loss or depreciation of, assets are for the purposes of this Act, and in particular for the purposes of section 20 above (disposal of assets by owner where any capital sum is derived from assets), sums derived from the assets.

(3) In this section “policy of insurance” does not include a policy of assurance on human life.

Disallowance of insurance premiums as expenses

141

Without prejudice to the provisions of section 33 above (exclusion of expenditure by reference to tax on income), there shall be excluded from the sums allowable as a deduction in the computation under Part II of Chapter II above of the gain accruing to a person on the disposal of an asset any premiums or other payments made under a policy of insurance of the risk of any kind of damage or injury to, or loss or depreciation of, the asset.

Underwriters

142

(1) An underwriting member of Lloyd's or of an approved association of underwriters shall, subject to the following provisions of this section, be treated for the purposes of this Act as absolutely entitled as against the trustees to the investments of his premiums trust fund, his special reserve fund (if any) and any other trust fund required or authorised by the rules of Lloyd's or the association in question, or required by the underwriting agent through whom his business or any part of it is carried on, to be kept in connection with the business.

(2) The trustees of any premiums trust fund shall, subject to subsection (3) below, be assessed and charged to capital gains tax as if subsection (1) above had not been passed.

(3) The assessment to be made on the trustees of a fund by virtue of subsection (2) above for any year of assessment shall not take account of losses accruing in any previous year of assessment, and if for that or any other reason the tax paid on behalf of an underwriting member for any year of assessment by virtue of assessments so made exceeds the capital gains tax for which he is liable, the excess shall, on a claim by him, be repaid.

(4) For the purposes of subsections (2) and (3) above the underwriting agent may be treated as a trustee of the premiums trust fund.

Life assurance and deferred annuities

143

(1) This section has effect as respects any policy of assurance or contract for a deferred annuity on the life of any person.

(2) No chargeable gain shall accrue on the disposal of, or of an interest in, the rights under any such policy of assurance or contract except where the person making the disposal is not the original beneficial owner and acquired the rights or interest for a consideration in money or money's worth.

(3) Subject to subsection (2) above, the occasion of—

(a) the payment of the sum or sums assured by a policy of assurance, or

(b) the transfer of investments or other assets to the owner of a policy of assurance in accordance with the policy,

and the occasion of the surrender of a policy of assurance, shall be the occasion of a disposal of the rights under the policy of assurance.

(4) Subject to subsection (2) above, the occasion of the payment of the first instalment of a deferred annuity, and the occasion of the surrender of the rights under a contract for a deferred annuity, shall be the occasion of a disposal of the rights under the contract for a deferred annuity and the amount of the consideration for the disposal of a contract for a deferred annuity shall be the market value at that time of the right to that and further instalments of the annuity.

Superannuation funds, annuities and annual payments

144

No chargeable gain shall accrue to any person on the disposal of a right to, or to any part of—

(a) any allowance, annuity or capital sum payable out of any superannuation fund, or under any superannuation scheme, established solely or mainly for persons employed in a profession, trade, undertaking or employment, and their dependants,

(b) an annuity granted otherwise than under a contract for a deferred annuity by a company as part of its business of granting annuities on human life, whether or not including instalments of capital, or an annuity granted or deemed to be granted under the Government Annuities Act 1929, or

Other exemptions and reliefs

Charities

145

(1) Subject to subsection (2) below a gain shall not be a chargeable gain if it accrues to a charity and is applicable and applied for charitable purposes.

(2) If property held on charitable trusts ceases to be subject to charitable trusts—

(a) the trustees shall be treated as if they had disposed of, and immediately re-acquired, the property for a consideration equal to its market value, any gain on the disposal being treated as not accruing to a charity, and

(b) if and so far as any of that property represents, directly or indirectly, the consideration for the disposal of assets by the trustees, any gain accruing on that disposal shall be treated as not having accrued to a charity,

and an assessment to capital gains tax chargeable by virtue of paragraph (b) above may be made at any time not more than three years after the end of the year of assessment in which the property ceases to be subject to charitable trusts.

Gifts to charities etc.

146

(1) Subsection (2) below shall apply where a disposal of an asset is made otherwise than under a bargain at arm's length—

(a) to a charity, or

(b) to any of the bodies mentioned in paragraph 12 of Schedule 6 to the Finance Act 1975 (gifts for national purposes, etc.).

(2) Section 19(3) above (consideration deemed to be equal to market value) and section 147(3) below shall not apply; but if the disposal is by way of gift (including a gift in settlement) or for a consideration not exceeding the sums allowable as a deduction under section 32 above, then—

(a) the disposal and acquisition shall be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal, and

(b) where, after the disposal, the asset is disposed of by the person who acquired it under the disposal, its acquisition by the person making the earlier disposal shall be treated for the purposes of this Act as the acquisition of the person making the later disposal.

(3) Where, otherwise than on the termination of a life interest (within the meaning of section 55 above) by the death of the person entitled thereto, any assets or parts of any assets forming part of settled property are, under section 54 or 55 above, deemed to be disposed of and re-acquired by the trustee, and—

(a) the person becoming entitled as mentioned in section 54(1) above is a charity, or a body mentioned in paragraph 12 of Schedule 6 to the Finance Act 1975 (gifts for national purposes, etc.), or

(b) any of the assets which, or parts of which, are deemed to be disposed of and re-acquired under section 55(1) above are held for the purposes of a charity, or a body mentioned in the said paragraph 12,

then, if no consideration is received by any person for or in connection with any transaction by virtue of which the charity or other body becomes so entitled or the assets are so held, the disposal and re-acquisition of the assets to which the charity or other body becomes so entitled or of the assets or parts of the assets which are held as mentioned in paragraph (b) above shall, notwithstanding sections 54 and 55 above, be treated for the purposes of this Act as made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.

Works of art etc.

147

(1) A gain accruing on the disposal of an asset by way of gift shall not be a chargeable gain if the asset is property falling within sub-paragraph (2) of paragraph 13 of Schedule 6 to the Finance Act 1975 (gifts for public benefit) and the Treasury give a direction in relation to it under sub-paragraph (1) of that paragraph.

(2) A gain shall not be a chargeable gain if it accrues on the disposal of an asset with respect to which a capital transfer tax undertaking or an undertaking under the following provisions of this section has been given and—

(a) the disposal is by way of sale by private treaty to a body mentioned in paragraph 12 of the said Schedule 6 (museums, etc), or is to such a body otherwise than by sale, or

(b) the disposal is to the Board in pursuance of paragraph 17 of Schedule 4 to the said Act of 1975 or in accordance with directions given by the Treasury under section 50 or 51 of the Finance Act 1946 (acceptance of property in satisfaction of tax).

(3) Subsection (4) below shall have effect in respect of the disposal of any asset which is property which has been or could be designated under section 77 of the Finance Act 1976, being—

(a) a disposal by way of gift, including a gift in settlement, or

(b) a disposal of settled property by the trustee on an occasion when, under section 54(1) or 55(1) above, the trustee is deemed to dispose of and immediately reacquire settled property (other than any disposal on which by virtue of section 56 above no chargeable gain or allowable loss accrues to the trustee).

if the requisite undertaking described in the said section 77 (maintenance, preservation and access) is given by such person as the Treasury think appropriate in the circumstances of the case.

(4) The person making a disposal to which subsection (3) above applies and the person acquiring the asset on the disposal shall be treated for all the purposes of this Act as if the asset was acquired from the one making the disposal for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal.

(5) If—

(a) there is a sale of the asset and capital transfer tax is chargeable under section 78 of the Finance Act 1976 (or would be chargeable if a capital transfer tax undertaking as well as an undertaking under this section had been given), or

(b) the Treasury are satisfied that at any time during the period for which any such undertaking was given it has not been observed in a material respect,

the person selling that asset or, as the case may be, the owner of the asset shall be treated for the purposes of this Act as having sold the asset for a consideration equal to its market value, and, in the case of a failure to comply with the undertaking, having immediately re-acquired it for a consideration equal to its market value.

(6) The period for which an undertaking under this section is given shall be until the person beneficially entitled to the asset dies or it is disposed of, whether by sale or gift or otherwise; and if the asset subject to the undertaking is disposed of—

(a) otherwise than on sale, and

(b) without a further undertaking being given under this section,

subsection (5) above shall apply as if the asset had been sold to an individual.

References in this subsection to a disposal shall be construed without regard to any provision of this Act under which an asset is deemed to be disposed of.

(7) Where under subsection (5) above a person is treated as having sold for a consideration equal to its market value any asset within section 77(1)(c), (d) or (e) of the Finance Act 1976, he shall also be treated as having sold and immediately reacquired for a consideration equal to its market value any asset associated with it; but the Treasury may direct that the preceding provisions of this subsection shall not have effect in any case in which it appears to them that the entity consisting of the asset and any assets associated with it has not been materially affected.

For the purposes of this subsection two or more assets are associated with each other if one of them is a building falling within the said section 77(1)(c) and the other or others such land or objects as, in relation to that building, fall within the said section 77(1)(d) or (e).

(8) If in pursuance of subsection (5) above a person is treated as having on any occasion sold an asset and capital transfer tax becomes chargeable on the same occasion, then, in determining the value of the asset for the purposes of that tax, an allowance shall be made for the capital gains tax chargeable on any chargeable gain accruing on that occasion.

(9) In this section “capital transfer tax undertaking” means an undertaking under sections 76 to 81 of the Finance Act 1976 or section 31 or 34 of the Finance Act 1975.

Maintenance funds for historic buildings

148

(1) This section applies where a person disposes of an asset to trustees in circumstances such that the disposal is a transfer of value which by virtue of section 84 of the Finance Act 1976 (capital transfer tax: maintenance funds for historic buildings) is an exempt transfer.

(2) The person making the disposal and the person acquiring the asset on the disposal shall be treated for all the purposes of this Act as if the asset was acquired from the one making the disposal for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal.

Employee trusts

149

(1) Where—

(a) a close company disposes of an asset to trustees in circumstances such that the disposal is a disposition which by virtue of section 90 of the Finance Act 1976 (employee trusts) is not a transfer of value for the purposes of capital transfer tax, or

(b) an individual disposes of an asset to trustees in circumstances such that the disposal is an exempt transfer by virtue of section 67 of the Finance Act 1978 (employee trusts: capital transfer tax),

this Act shall have effect in relation to the disposal in accordance with subsections (2) and (3) below.

(2) Section 19(3) above (consideration deemed to be equal to market value) shall not apply to the disposal; and if the disposal is by way of gift or is for a consideration not exceeding the sums allowable as a deduction under section 32 above—

(a) the disposal, and the acquisition by the trustees, shall be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal, and

(b) where the trustees dispose of the asset, its acquisition by the company or individual shall be treated as its acquisition by the trustees.

(3) Where the disposal is by a close company, section 75(1) above (assets disposed of for less than market value) shall apply to the disposal as if for the reference to market value there were substituted a reference to market value or the sums allowable as a deduction under section 32 above, whichever is the less.

(4) Subject to subsection (5) below, this Act shall also have effect in accordance with subsection (2) above in relation to any disposal made by a company other than a close company if—

(a) the disposal is made to trustees otherwise than under a bargain made at arm's length, and

(b) the property disposed of is to be held by them on trusts of the description specified in paragraph 17(1) of Schedule 5 to the Finance Act 1975 (that is to say, those in relation to which the said section 90 of the Finance Act 1976 has effect) and the persons for whose benefit the trusts permit the property to be applied include all or most of either—

(i) the persons employed by or holding office with the company, or

(ii) the persons employed by or holding office with the company or any one or more subsidiaries of the company.

(5) Subsection (4) above does not apply if the trusts permit any of the property to be applied at any time (whether during any such period as is referred to in the said paragraph 17(1) or later) for the benefit of—

(a) a person who is a participator in the company (“the donor company ”), or

(b) any other person who is a participator in any other company that has made a disposal of property to be held on the same trusts as the property disposed of by the donor company, being a disposal in relation to which this Act has had effect in accordance with subsection (2) above, or

(c) any other person who has been a participator in the donor company or any such company as is mentioned in paragraph (b) above at any time after, or during the ten years before, the disposal made by that company, or

(d) any person who is connected with a person within paragraph (a), (b) or (c) above.

(6) The participators in a company who are referred to in subsection (5) above do not include any participator who—

(a) is not beneficially entitled to, or to rights entitling him to acquire, 5 per cent. or more of, or of any class of the shares comprised in, its issued share capital, and

(b) on a winding-up of the company would not be entitled to 5 per cent. or more of its assets;

and in determining whether the trusts permit property to be applied as mentioned in that subsection, no account shall be taken—

(i) of any power to make a payment which is the income of any person for any of the purposes of income tax, or would be the income for any of those purposes of a person not resident in the United Kingdom if he were so resident, or

(ii) if the trusts are those of a profit sharing scheme approved under the Finance Act 1978, of any power to appropriate shares in pursuance of the scheme.

(7) In subsection (4) above “subsidiary” has the same meaning as in the Companies Act 1948 and in subsections (5) and (6) above “participator” has the meaning given in section 303(1) of the Taxes Act, except that it does not include a loan creditor.

(8) In this section “close company” includes a company which, if resident in the United Kingdom, would be a close company as defined in section 155(1) below.

PART VIII — Supplemental

Valuation

Valuation: general

150

(1) In this Act “market value” in relation to any assets means the price which those assets might reasonably be expected to fetch on a sale in the open market.

(2) In estimating the market value of any assets no reduction shall be made in the estimate on account of the estimate being made on the assumption that the whole of the assets is to be placed on the market at one and the same time.

(3) The market value of shares or securities listed in The Stock Exchange Daily Official List shall, except where in consequence of special circumstances prices quoted in that List are by themselves not a proper measure of market value, be as follows—

(a) the lower of the two prices shown in the quotations for the shares or securities in The Stock Exchange Daily Official List on the relevant date plus one-quarter of the difference between those two figures, or

(b) halfway between the highest and lowest prices at which bargains, other than bargains done at special prices, were recorded in the shares or securities for the relevant date,

choosing the amount under paragraph (a) if less than that under paragraph (b), or if no such bargains were recorded for the relevant date, and choosing the amount under paragraph (b) if less than that under paragraph (a):

Provided that—

(i) this subsection shall not apply to shares or securities for which The Stock Exchange provides a more active market elsewhere than on the London trading floor, and

(ii) if the London trading floor is closed on the relevant date the market value shall be ascertained by reference to the latest previous date or earliest subsequent date on which it is open, whichever affords the lower market value.

(4) In this Act “market value” in relation to any rights of unit holders in any unit trust scheme the buying and selling prices of which are published regularly by the managers of the scheme shall mean an amount equal to the buying price (that is the lower price) so published on the relevant date, or if none were published on that date, on the latest date before.

(5) In relation to an asset of a kind the sale of which is subject to restrictions imposed under the Exchange Control Act 1947 such that part of what is paid by the purchaser is not retainable by the seller the market value, as arrived at under subsection (1), subsection (3) or subsection (4) above, shall be subject to such adjustment as is appropriate having regard to the difference between the amount payable by a purchaser and the amount receivable by a seller.

(6) The provisions of this section, with sections 151 to 153 below, have effect subject to Part I of Schedule 6 to this Act (market value at a time before the commencement of this Act).

Assets disposed of in a series of transactions

151

If a person is given, or acquires from one or more persons with whom he is connected, by way of two or more gifts or other transactions, assets of which the aggregate market value, when considered separately in relation to the separate gifts or other transactions, is less than their aggregate market value when considered together, then for the purposes of this Act their market value, where relevant, shall be taken to be the larger market value, to be apportioned rateably to the respective disposals.

Unquoted shares and securities

152

(1) The provisions of subsection (3) below shall have effect in any case where, in relation to an asset to which this section applies, there falls to be determined by virtue of section 150(1) above the price which the asset might reasonably be expected to fetch on a sale in the open market.

(2) The assets to which this section applies are shares and securities which are not quoted on a recognised stock exchange, within the meaning of section 535 of the Taxes Act, at the time as at which their market value for the purposes of tax on chargeable gains falls to be determined.

(3) For the purposes of a determination falling within subsection (1) above, it shall be assumed that, in the open market which is postulated for the purposes of that determination, there is available to any prospective purchaser of the asset in question all the information which a prudent prospective purchaser of the asset might reasonably require if he were proposing to purchase it from a willing vendor by private teatry and at arm's length.

Value determined for capital transfer tax

153

Where on the death of any person capital transfer tax is chargeable on the value of his estate immediately before his death and the value of an asset forming part of that estate has been ascertained (whether in any proceedings or otherwise) for the purposes of that tax, the value so ascertained shall be taken for the purposes of this Act to be the market value of that asset at the date of the death.

Other provisions

Income tax decisions

154

Any assessment to income tax or decision on a claim under the Income Tax Acts, and any decision on an appeal under the Income Tax Acts against such an assessment or decision, shall be conclusive so far as under Chapter II of Part II of this Act, or any other provision of this Act, liability to tax depends on the provisions of the Income Tax Acts.

Interpretation

155

(1) In this Act, unless the context otherwise requires—

“allowable loss” has the meaning given by section 29 above,

“the Board” means the Commissioners of Inland Revenue,

“chargeable gain” has the meaning given by section 28(2) above,

“chargeable period” means a year of assessment or an accounting period of a company for purposes of corporation tax,

“close company” has the meaning given by sections 282 and 283 of the Taxes Act,

“company” includes any body corporate or unincorporated association but does not include a partnership, and shall be construed in accordance with section 93 above (application of Act to unit trusts),

“control” shall be construed in accordance with section 302 of the Taxes Act,

“inspector” means any inspector of taxes,

“land” includes messuages, tenements, and hereditaments, houses and buildings of any tenure,

“married woman living with her husband ”: see subsection (2) below,

“part disposal” has the meaning given by section 19(2) above,

“personal representatives” has the meaning given by section 432(4) of the Taxes Act,

“quoted ” on a stock exchange, or recognised stock exchange, in the United Kingdom: see subsection (3) below,

“the Taxes Act” means the Income and Corporation Taxes Act 1970,

“trade” has the same meaning as in the Income Tax Acts,

“trading stock” has the meaning given by section 137(4) of the Taxes Act,

“wasting asset” has the meaning given by section 37 above and paragraph 1 of Schedule 3 to this Act,

“year of assessment” means, in relation to capital gains tax, a year beginning on 6th April and ending on 5th April in the following calendar year, and “1979-80” and so on indicate years of assessment as in the Income Tax Acts.

(2) References in this Act to a married woman living with her husband shall be construed in accordance with section 42(1)(2) of the Taxes Act

(3) References in this Act to quotation on a stock exchange in the United Kingdom or a recognised stock exchange in the United Kingdom shall be construed as references to listing in the Official List of The Stock Exchange.

(4) The Table below indexes other general definitions in this Act.

Expression defined	Reference
“Absolutely entitled as against the trustee ”	S. 46(2).
“Authorised unit trust ”	S. 92.
“Branch or agency ”	S. 12(3).
“Class”, in relation to shares or securities	S. 64(1).
“Connected ”, in references to persons being connected with one another.	S. 63.
“Court investment fund ”	S. 92.
“Gilt-edged securities ”	Schedule 2.
“Investment trust”	S. 92.
“Issued”, in relation to shares or debentures	S. 64(2).
“Lease ” and cognate expressions	Paragraph 10(1) of Schedule 3.
“Legatee ”	S. 47(2)(3).
“Market value ”	Ss. 150 to 153; Part I of Schedule 6.
“Resident ” and “ordinarily resident ”	S. 18(1).
“Settled property ”	S. 51.
“Shares ”	S. 64(1).
“Unit trust scheme ”	S. 92.

(5) References in the Income Tax Acts to profits or gains shall not include references to chargeable gains.

PART IX — General

Commencement

156

(1) Except as otherwise provided by this Part of this Act, this Act shall come into force in relation to tax for the year 1979-80 and subsequent years of assessment, and tax for other chargeable periods beginning after 5th April 1979.

(2) The following provisions of this Act, that is—

(a) so much of any provision of this Act as authorises the making of any order or other instrument,

(b) except where the tax concerned is all tax for chargeable periods to which this Act does not apply, so much of any provision of this Act as confers any power or imposes any duty the exercise or performance of which operates or may operate in relation to tax for more than one chargeable period,

shall come into force for all purposes on 6th April 1979 to the exclusion of the corresponding enactments repealed by this Act.

Savings, transitory provisions and consequential amendments

157

(1) Schedule 6 to this Act, which contains transitory provisions and savings, shall have effect, and the repeals made by section 158(1) below have effect subject to that Schedule.

(2) For the avoidance of doubt it is hereby declared that this Act has effect subject to those provisions of the Taxes Act and other enactments relating to chargeable gains which are not repealed by this Act; and with a view to preserving the existing effect of such enactments as are mentioned in Schedule 7 to this Act, they shall be amended in accordance with that Schedule.

(3) The provisions of the said Schedule 7, and the other provisions of this Part of this Act, are without prejudice to the provisions of the Interpretation Act 1978 as respects the effect of repeals.

(4) This section and the said Schedules 6 and 7 shall come into force on the passing of this Act.

Repeals

158

(1) The enactments and instruments mentioned in Schedule 8 to this Act are hereby repealed to the extent specified in the third column of that Schedule.

(2) The said repeals shall come into force in accordance with section 156 above.

Continuity and construction of references to old and new law

159

(1) The continuity of the operation of the law relating to chargeable gains shall not be affected by the substitution of this Act for the repealed enactments.

(2) Any reference, whether express or implied, in any enactment, instrument or document (including this Act and any enactment amended by Schedule 7 to this Act) to, or to things done or falling to be done under or for the purposes of, any provision of this Act shall, if and so far as the nature of the reference permits, be construed as including, in relation to the times, years or periods, circumstances or purposes in relation to which the corresponding provision in the repealed enactments has or had effect, a reference to, or as the case may be to things done or falling to be done under or for the purposes of, that corresponding provision.

(3) Any reference, whether express or implied, in any enactment, instrument or document (including the repealed enactments and enactments, instruments and documents passed or made after the passing of this Act) to, or to things done or falling to be done under or for the purposes of, any of the repealed enactments shall, if and so far as the nature of the reference permits, be construed as including, in relation to the times, years or periods, circumstances or purposes in relation to which the corresponding provision of this Act has effect, a reference to, or as the case may be to things done or falling to be done under or for the purposes of, that corresponding provision.

(4) In this section “the repealed enactments” means the enactments repealed by this Act.

Short title

160

This Act may be cited as the Capital Gains Tax Act 1979.

SCHEDULE 1

Preliminary

1

In this Schedule references to any subsections not otherwise identified are references to subsections of section 5 of this Act

Husband and wife

2

(1) For any year of assessment during which a married woman is living with her husband subsections (1) to (4) shall apply to them as if the amounts of £1,000, £5,000 and £600 were divided between them—

(a) in proportion to their respective taxable amounts for that year (disregarding for this purpose paragraphs (a) and (b) of subsection (4)), or

(b) where the aggregate of those amounts does not exceed £1,000 and allowable losses accruing to either of them in a previous year are carried forward from that year, in such other proportion as they may agree.

(2) Sub-paragraph (1) above shall also apply for any year of assessment during a part of which (being a part beginning with 6th April) a married woman is living with her husband but—

(a) her taxable amount for that year shall not include chargeable gains or allowable losses accruing to her in the remainder of the year, and

(b) subsections (1) to (4) shall apply to her (without the modification in sub-paragraph (1) above) for the remainder of the year as if it were a separate year of assessment.

3

(1) For any year of assessment during which or during a part of which (being a part beginning with 6th April) the individual is a married man whose wife is living with him and in relation to whom section 45(1) of this Act applies subsection (5) shall apply as if—

(a) the chargeable gains accruing to him in the year included those accruing to her in the year or the part of the year, and

(b) all the disposals of assets made by her in the year or the part of the year were made by him.

(2) Subsection (5) shall not apply for any year of assessment during which or during a part of which (being a part beginning with 6th April)—

(a) the individual is a married man whose wife is living with him but in relation to whom the said section 45(1) does not apply, or

(b) the individual is a married woman living with her husband.

Personal representatives

4

For the year of assessment in which an individual dies and for the two next following years of assessment, subsections (1) to (5) shall apply to his personal representatives as they apply to an individual.

Trustees

5

(1) For any year of assessment during the whole or part of which settled property is held on trusts which secure that, during the lifetime of a mentally disabled person or a person in receipt of attendance allowance, any of the property which is applied, and any income arising from the property, is applied only or mainly for the benefit of that person, subsections (1) to (5) shall apply to the trustees of the settlement as they apply to an individual.

(2) In this paragraph “mentally disabled person” means a person who by reason of mental disorder within the meaning of the Mental Health Act 1959 is incapable of administering his property or managing his affairs and “attendance allowance” means an allowance under section 35 of the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975.

6

(1) For any year of assessment during the whole or part of which any property is settled property, not being a year of assessment for which paragraph 5(1) above applies, subsections (1) to (5) shall apply to the trustees of a settlement as they apply to an individual but with the following modifications.

(2) In subsections (1), (4) and (5) for “£1,000” there shall be substituted “£500 ”.

(3) For subsections (2) and (3) there shall be substituted—

(2) If an individual's taxable amount for a year of assessment exceeds £500 the amount of capital gains tax to which he is chargeable for that year shall not exceed one-half of the excess.

(4) In subsection (5) for “£5,000” there shall be substituted “£2,500 ”.

(5) This paragraph applies where the settlement was made before 7th June 1978.

SCHEDULE 2

PART I

1

For the purposes of this Act “gilt-edged securities” means the securities specified in Part II of this Schedule, and such of the following securities, denominated in sterling and issued after 15th April 1969, as may be specified by order made by the Treasury by statutory instrument, namely—

(a) stocks and bonds issued under section 12 of the National Loans Act 1968, and

(b) stocks and bonds guaranteed by the Treasury and issued under the Electricity (Scotland) Acts 1943 to 1954, the Electricity Acts 1947 and 1957 and the Gas Act 1972.

2

The Treasury shall cause particulars of any order made under paragraph 1 above to be published in the London and Edinburgh Gazettes as soon as may be after the order is made.

3

Section 14(b) of the Interpretation Act 1978 (implied power to amend orders made by statutory instrument) shall not apply to the power of making orders under paragraph 1 above.

PART II — Existing Gilt-Edged Securities

SCHEDULE 3

Leases of land as wasting assets: curved line restriction of allowable expenditure

1

(1) A lease of land shall not be a wasting asset until the time when its duration does not exceed fifty years.

(2) If at the beginning of the period of ownership of a lease of land it is subject to a sub-lease not at a rackrent and the value of the lease at the end of the duration of the sub-lease, estimated as at the beginning of the period of ownership, exceeds the expenditure allowable under section 32(1)(a) of this Act in computing the gain accruing on a disposal of the lease, the lease shall not be a wasting asset until the end of the duration of the sub-lease.

(3) In the case of a wasting asset which is a lease of land the rate at which expenditure is assumed to be written off shall, instead of being a uniform rate as provided by section 38 of this Act, be a rate fixed in accordance with the Table below.

(4) Accordingly, for the purposes of the computation under Chapter II of Part II of this Act of the gain accruing on a disposal of a lease, and given that—

(a) the percentage derived from the Table for the duration of the lease at the beginning of the period of ownership is P(1),

(b) the percentage so derived for the duration of the lease at the time when any item of expenditure attributable to the lease under section 32(1)(b) of this Act is first reflected in the nature of the lease is P(2), and

then—

(i) there shall be excluded from the expenditure attributable to the lease under section 32(1)(a) of this Act a fraction equal to $P(1)−P(3)P(1)$, and

(ii) there shall be excluded from any item of expenditure attributable to the lease under section 32(1)(b) of this Act a fraction equal to $P(2)−P(3)P(2)$.

(5) This paragraph applies notwithstanding that the period of ownership of the lease is a period exceeding fifty years and, accordingly, no expenditure shall be written off under this paragraph in respect of any period earlier than the time when the lease becomes a wasting asset.

(6) Section 39 of this Act (wasting assets qualifying for capital allowances) shall apply in relation to this paragraph as it applies in relation to section 38. TABLE

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