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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 - example - gains and losses accruing in years later than the year of disposal of the asset

Mr Black disposes of an asset (the “original asset”) in Year 1, realising a chargeable gain for CGT purposes of £100,000. He makes a qualifying investment and makes a claim under the Enterprise Investment Scheme to postpone the gain. In Year 3 he goes abroad and ceases to be resident in the UK. Under the EIS rules this is a “chargeable event” and he is chargeable to CGT on a “revived gain” of £100,000.

In Year 6, whilst still resident abroad, Mr Black disposes of the right to deferred unascertainable consideration which he received on disposing of the original asset. The loss on the disposal is £15,000. In Year 7 Mr Black returns to the UK and under the CGT rules relating to temporary absence abroad the loss of £15,000 is treated as a loss of Year 7. Mr Black fulfils the notification requirements for this loss to be an allowable loss.

Mr Black is, however, entitled (if all the other relevant conditions are met) to elect under TCGA92/S279A for the allowable loss of Year 7 to be treated as accruing to him in Year 3, because Year 3 is a year in which a chargeable gain accrued to him on the disposal of the original asset and is earlier than the year of the disposal of the right (Year 6) which gave rise to the loss.