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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Appropriations to trading stock

TCGA92/SCH7A/PARA10

There are special rules in TCGA92/S161, see CG69200+, for cases where an asset is appropriated as trading stock. The appropriation gives rise to a deemed market value disposal for capital gains purposes under Section 161(1). But there is a right of election under Section 161(3) to roll over any gain or loss into the Case I computation. If there would be a chargeable gain, the election reduces the value at which the asset is taken into account for Case I purposes, so increasing the Case I profits. If there would be an allowable loss, the election increases the value at which the asset is taken into account for Case I purposes, so reducing the Case I profits.

Note: Additional rules relating to loss buying were enacted in FA 2006. See CG47020+ for guidance on the rules which apply in priority to TCGA92/SCH7A for accounting periods ending on or after 5 December 2005.

FA11/S46 and FA11/SCH11 greatly simplified the rules in TCGA92/SCH7A for the deduction of losses on or after 19 July 2011. See CG47400+ for guidance on loss streaming from that date.