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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Dwellings subject to ATED: how ATED-related gains/losses are charged/relieved - general

ATED-related gains computed under TCGA92/Sch4ZZA may be subject to further adjustment where the consideration for the disposal exceeds the threshold amount for that disposal (see CG73620) by a marginal amount: the chargeable ATED-related gain may be less than the gain computed under Schedule 4ZZA - TCGA92/S2F, see CG73650.

Where the expenditure deductible in computing a loss exceeds the threshold amount for that disposal but consideration for the disposal does not (see CG73620) there may nevertheless be an allowable ATED-related loss, albeit in a restricted amount: TCGA92/S2E, see CG73655.

The total ATED-related chargeable gains and allowable loss for a tax year are aggregated. If there are net chargeable gains for the year, the net amount is chargeable to capital gains tax for that tax year at the rate of capital gains tax for ATED-related gains - 28%, TCGA92/S4 (3A).

If the ATED-related allowable losses exceed the chargeable gains the excess is carried forward and available for set off in future tax years, but only against ATED-related chargeable gains in later years. Excess ATED-related allowable losses cannot be carried back and set-off against chargeable gains in any tax year before the one in which they accrued.

ATED-related chargeable gains and allowable losses are effectively ring-fenced. Only ATED-related allowable losses can be set off against ATED-related chargeable gains and they cannot be set off against chargeable gains of any other description.

Gains and losses computed under Schedule 4ZZA that are not ATED-related remain subject to the usual capital gains rules. For instance, if the gain/loss accrues to a company within the charge to CT on its chargeable gains, it remains chargeable to CT, or allowable for the purposes of CT on chargeable gains, in the same way as if no ATED-related gain/loss had accrued on the disposal.

See also—

  • CG73660 for the rules where residential property subject to ATED is appropriated to trading stock
  • CG73665 for the rules where a company with a chargeable interest in a residential property subject to ATED ceases to be resident in the UK and is deemed to dispose of the property under TCGA92/S185.