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HMRC internal manual

Capital Gains Manual

Non-resident company with a UK permanent establishment: deemed gains: computation


When an event occurs giving rise to a chargeable occasion by reason of TCGA92/S25, see CG42130, the assets involved are deemed to have been disposed of at their market value immediately before the change took place and to have been immediately reacquired at that value. You should therefore include that value in the computation as the disposal consideration.

The acquisition cost should be arrived at on the normal basis as for gains on disposals, see CG42160. You should not allow an acquisition cost based on the value of the asset at the date trading through the permanent establishment started.

The normal rules apply for all other items appearing in the computation.


A non-resident company begins to trade as a printer in the UK in July 2004. It acquires a freehold manufacturing property on that date for £200,000 and a printing press for £30,000. The property is a permanent establishment (CTA10/S1141).

In September 2010 the non-resident company transferred the printing press outside the UK and continued to use it for the purposes of its overseas trade. In February 2011 it sold it for a sum equivalent to £45,000. In September 2010 the market value of the press was £42,000. The company is liable to a charge to Corporation Tax on a gain arising on the transfer of the asset outside the UK in September 2010.

The chargeable gain is disposal proceeds of £42,000, less cost of £30,000, less indexation allowance (as the disposal is made by a company, CG17207) of £6,180 (£30,000 x 0.206), which equals £5,820.

The non-resident company is not liable to any further charge when it disposes of the press in February 2011. Thus the increase in value between September 2010 and February 2011 escapes any charge to UK taxation.

In November 2010 the company closes down its UK permanent establishment, which has not been trading profitably, and disposes of the premises in March 2011 for £270,000. The market value of the premises when the company ceased to trade in the UK was £290,000.

The non-resident company is liable to Corporation Tax on the deemed disposal of the premises when it ceased to trade in November 2010. The gain is disposal proceeds £290,000, less acquisition cost £200,000, less indexation allowance £44,600 (£200,000 x 0.223), which equals £45,400.

There is no further charge on the company when it disposes of the property in March 2011 because the asset is not at that time in use for the purposes of a trade carried on in the UK through a permanent establishment.