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HMRC internal manual

Capital Gains Manual

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Deferred consideration: unascertainable: election for treatment of loss - effect of election under section 279A

TCGA92/S279C

Where all the conditions for relief are met and the taxpayer makes an election under TCGA92/S279A, the relevant loss is treated as accruing to him in a year of assessment earlier than the year of the loss, as set out below. (CG15121 and CG15122 tell you how elections under TCGA92/S279A must be made.)

The relevant loss is treated as accruing in the earliest year of assessment which is an eligible year, see CG15086 above, instead of in the year of the loss. This treatment, which is subject to the remaining provisions in TCGA92/S279C, permits the loss to be deducted from chargeable gains accruing to the taxpayer in the first eligible year.

There is a limit (the “first year limit”) on the amount of the relevant loss that falls to be deducted from chargeable gains of the first eligible year in accordance with TCGA92/S2(2)(a). See CG15101.

If the amount of the relevant loss does not exceed this limit, then the loss is wholly deducted from those chargeable gains.

If the amount of the relevant loss exceeds this limit, then part only of the loss (the amount of that part being equal to the limit) is deducted from those chargeable gains, and the excess is carried forward to later tax years in accordance with the rules set out in CG15105 below.

The general effect of the rules is to provide that no part of the relevant loss is deducted from the total amount of the chargeable gains accruing to the taxpayer in the first eligible year until after all other available allowable losses (including those which are the subject of earlier elections under TCGA92/S279A) have been deducted from that amount.