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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Registered trade unions and employers’ associations


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

  1. they are expended on provident benefits, or
  2. 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
  3. 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


  • 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
£30,000 = £10,000 used to buy other investments applied to provident benefits

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

Exemption under (b) is thus

£80,000 x 4/5 = £64,000

The overall position then becomes

Gain   £240,000
Exempt under sub-head (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/S152 (6) )   200,000
  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 chargeable 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 reinvested x chargeable gain i.e. £100,000 x £100,000 = 62,500
      total gain     £160,000    
  Roll-over relief             37,500

Amount chargeable

  Total chargeable gain   240,000
Less Exempt as in example 2 124,000  
  Rolled over 37,500 161,500
  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 chargeable gain reduced      
(£100,000 - 62,500) = 37,500 262,500
Revised ‘cost’     412,500