IFM08620 - Co-ownership Authorised Contractual Schemes (CoACS): Chargeable Gains calculation

When investors in CoACS dispose of some or all their units, the chargeable gain is calculated following the normal rules subject to the adjustments introduced by SI2017/1204 which introduced an amended section 103D into the Taxation of Chargeable Gains Act 1992 (TCGA).

Adjustments to base cost

The new rules were introduced from 1 January 2018 in the amended section 103D(4) to (7) and require that certain amounts are taken into account in the chargeable gains calculation to avoid double taxation or relief from tax on the same amounts. They provide that in most cases adjustments are made to the capital gains base cost of units in the scheme as follows.

  1. Any amounts taxable as income on an investor, as well as income which is not liable to tax, are added to base cost;
  2. Any amounts of expense deductible for tax purposes for the investor are deducted from base cost but not so as to reduce base cost below zero; and
  3. Anything paid or transferred to the investor by the scheme is deducted from base cost but not so as to reduce base cost below zero.

Where amounts being deducted from base cost would exceed base cost, the excess is to be treated as additional consideration on the disposal of units.

In practice where income is paid out to investors by the scheme, it will in most cases be added to base cost at 1 above and then deducted from base cost at 3 above.

Treatment of capital expenditure

From 1 January 2018 there was a change to the rule which prevents expenditure which qualifies for capital allowances from being taken into account as expenditure in the event of calculating an allowable loss for chargeable gains.

The revised rule applies:

  • where the expenditure is in relation to the underlying asset but the investor’s asset for chargeable gains purposes is their holding of units in the CoACS; and
  • to the amount of the expenditure which – up to the point of a disposal – has been eligible for a capital allowance claim (whether or not a claim has been made).