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HMRC internal manual

Capital Gains Manual

Small capital distributions: tp does not want distribution t/a small

There may be circumstances in which the taxpayer wants a small capital distribution to be treated as a disposal. If the distribution is treated as a disposal the taxpayer only loses a proportion of the allowable cost and indexation allowance. If TCGA92/S122 (2) applies the allowable cost and indexation allowance is reduced by the full amount of the distribution received. This may not be to the taxpayer’s advantage if any gain would be covered by their annual exempt amount.

Any direction by the Inspector under Section 122(2) can be ignored if the taxpayer would prefer to treat a small capital distribution as a disposal.

NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. Companies and other concerns within the charge to Corporation Tax are not affected by these changes. For indexation allowance see CG17207+ and for taper relief see CG17895+.