CG67600 - Registered trade unions and employers’ associations
CTA2010/S981
CTA2010/S981, exempts the income (excluding trading income) and the chargeable gains of a registered trade union under certain conditions, see CTM41260. Chargeable gains should be regarded as applicable and applied to provident benefits when
- they are expended on provident benefits, or
- they accrue on investments which are not earmarked for purposes other than provident benefits, are re-invested in chargeable assets, and are not demonstrably used for other purposes such as strike pay, or
- they arise from the disposal of office premises, and the proceeds of disposal are used to acquire new premises, but only to the extent to which the old premises were used in the general administration of provident benefits. Any reasonable apportionment of premises between provident benefits provision and other use suggested by the trade union should be accepted. If part only of the proceeds of disposal of the old premises are used to buy new ones, the exemption should be restricted proportionately (and not on the lines of TCGA92/S153 (1) (roll-over relief, see CG60250+). Gains on parts of office premises which have been let may, of course, be investments within (b) above.
Gains not exempt under CTA2010/S981 may qualify for roll-over relief under TCGA92/S152 and TCGA92/S158 (1), see CG60250+ and example 3 below.
Example 1
A registered trade union owns and occupies offices which it sells for £600,000 giving rise to a gain of £240,000. It is agreed that one-half of the premises were used for the administration of provident benefits. It buys new offices for £450,000.
Exemption under (c) above is restricted by reference to -
- the proportion of the disposal proceeds which are re- invested, that is
450,000 = 3
600,000 4
and
- the extent to which the old premises were used for provident benefit purposes, that is, one-half.
The exemption is therefore
£240,000 x 3 x 1 = £90,000
4 2
and the balance of the gain £150,000 is assessable.
Example 2
The facts are as in example 1 except that of the premises sold, one-third was let, and the two-thirds occupied by the union was used equally for provident and non- provident benefit purposes. Furthermore, of the proceeds not used to buy new premises £30,000 was spent on the acquisition of shares qualifying under (b) above.
The exemption under (c) above is therefore
£240,000 x 3/4 x 1/3 = £60,000.
Exemption is also due under (b) above because of the investment in the part of the old offices which was let. The one-third of the disposal proceeds relating to the part which was let £200,000 is used as follows:
£450,000 = £150,000 invested in further property for letting
3
£30,000 = £10,000 used to buy other investments applied to provident benefits
3
The fraction to be exempted under (b) is therefore
£160,000 (=£150,000 + £10,000) = 4
£200,000 5
This fraction is applied to the gain from the let part which is:
£240,000 = £80,000
3
Exemption under (b) is thus
£80,000 x 4/5 = £64,000
The overall position then becomes:
Gain £240,000
Exempt under dub-hrad (c) £60,000
Exempt under sub-head (b) £64,000 £124,000
Chargeable gain £116,000
Example 3
The facts are as in example 2 Roll- over relief under TCGA92/S152 as extended by TCGA92/S158 (1) is available computed as follows
Consideration not reinvested (part of premises occupied by union)
Disposal consideration £600,000
Less
one-third part let (TCGA92/S12 (6)) £200,000
£400,000
Amount reinvested £450,000
Less
one-third part let £150,000 £300,000
Consideration not reinvested £100,000
Chargeable gain before roll-over (on part qualifying for relief under TCGA92/S153)
Total chargable gain £240,000
Less
one-third part let £80,000
Total gain on part of property occupied by union £160.000
Exempt as in example 2 £60,000
Chargeable gain before roll over £100,000
Roll-over relief (TCGA92/S153 (1))
Chargeable gain before roll over x £100,000
Less
Consideration not reinvest x chargeable gain i.e £100,000 x £100,000 = £62,500
total gain £160,000
Roll over relief £37,500
Amount chargeable
Total chargable gain £240,000
Less
Exempt as in example 2 £124,000
Rolled over £35,500 £161,500
Chargeable gain £78,500
Cost of new asset
The cost of the new asset should, in practice, be regarded as the actual cost less the amount by which the chargeable gain (not the whole gain) is reduced, that is
Cost of part let £150,000
Cost of remainder £300,000
Amount by which the chargable gain reduced
(£100,000 - 62,500) = £37,500 £262,500
Revised ‘cost’ £412,500