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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Deferred consideration: unascertainable: election for treatment of loss -outline of provisions

TCGA92/S279A

In the most straightforward cases the provisions will have effect where

  • a person disposes of an asset (the “original asset”) and incurs a liability to CGT on a chargeable gain accruing on the disposal;
  • some or all of the consideration for the disposal of the original asset consists of a right to deferred unascertainable consideration;
  • the person disposes of the right at an allowable loss for CGT purposes in a year of assessment which is later than the one in which the original asset was disposed of; and
  • the person elects to treat that loss as accruing in the year of assessment when the gain accrued.

Example 

In December 2010 (year of assessment 2010-11) Mr Jones disposes of an original asset in consideration for cash of £200,000 and a right to deferred unascertainable consideration valued at £50,000. There is a gain of £100,000 chargeable to CGT and CGT is paid.

In June 2013 (2013-14) Mr Jones disposes of the right for £40,000 and realises an allowable loss for CGT purposes of £10,000. He elects to treat that loss as a loss of the year 2010-11, reducing the net gain chargeable to CGT for that year to £90,000. The tax overpaid as a consequence of the election will be repaid to him.

Sections 279A to 279D however also cater for more complicated circumstances than those in the example above. For instance, chargeable gains may be deferred by virtue of a claim under the rules for the Enterprise Investment Scheme. Or a gain or loss incurred in a year of assessment when the taxpayer is temporarily abroad may be treated for TCGA purposes as accruing in a later year when he or she returns to the UK.