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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 - marginal relief for gains

Where the consideration for a disposal exceeds the ‘threshold amount’ (see CG73620) by only a moderate amount, and the ATED-related gain on the disposal is relatively large compared with the disposal consideration, the capital gains tax liability could have a distorting effect. In extreme cases the seller could save money by reducing the selling price below the threshold amount, eliminating any liability to pay capital gains tax. To prevent this distorting effect occurring, TCGA92/S2F provides a form of ‘tapering relief’.

Under the section the ATED-related chargeable gain is restricted to an amount which is the lower of—

  • the full ATED-related gain and
  • 5/3 times the difference between the consideration for the disposal and the threshold amount for that disposal.

Where only a proportion of the gain (the ‘relevant fraction’) is an ATED-related gain, the amount excluded from charge is reduced by the same proportion.


The consideration for a disposal is £2.6 million and threshold amount for that disposal is £2 million.

5/3 of the difference between these figures (£0.6 million) is £1 million. If the whole of the gain on the disposal is ATED-related, the chargeable gain is capped at £1 million. If only part of the gain is ATED-related, say 4/10, the ‘ATED-related’ chargeable gain is capped at 4/10 × £1 million = £400,000.

The gain that is not ATED-related is unaffected by any restriction on the amount of the ATED-related chargeable gain.