Calculation of ‘I’ Income and chargeable gains: FA12/S73 Step 2: Calculating the shareholders’ share of BLAGAB allowable losses: TGGA92/S210A(6)-(9)
TCGA92/S210A also provides for the situation where there are BLAGAB allowable losses and net non-BLAGAB chargeable gains. BLAGAB allowable losses are allowable as a deduction from the net non-BLAGAB chargeable gains after deducting current year and brought forward non-BLAGAB losses.
The deduction is limited to the ‘permitted amount’ of BLAGAB allowable losses. The permitted amount for the first accounting period in relation to which section 210A TCGA has effect is:
- the excess of the shareholders’ share of the BLAGAB allowable losses over the shareholders’ share of the BLAGAB chargeable gains in the accounting period; plus
- the shareholders’ share of BLAGAB allowable losses unutilised and brought forward (b/f) from earlier accounting periods (TCGA92/S210A(6)).
The permitted amount for subsequent accounting periods is:
- the amount unutilised and b/f from earlier accounting periods (TCGA92/210A(7)); plus
- the shareholders’ share of any net allowable losses in the current period (TCGA92/210A(9)).
if there are net chargeable gains in the accounting period the permitted amount is reduced by the fraction:
- b/f BLAGAB allowable losses set against BLAGAB chargeable gains of the accounting period; divided by
- b/f BLAGAB allowable losses
Assume a company has BLAGAB allowable losses of £400M in the current year and carried forward unrelieved shareholders’ share of BLAGAB allowable losses of £200M.
The shareholders’ share is 87%, so the shareholders’ share is £348m of the current year’s BLAGAB loss. In addition the brought forward unrelieved shareholder’s share of BLAGAB losses of £200m is available.
The permitted amount, i.e. the shareholders share of BLAGAB allowable losses to offset against any chargeable gains arising elsewhere in the company, is therefore £548M. TCGA92/S210(4) ensures that non-BLAGAB allowable losses are used first, in priority to BLAGAB allowable losses.
It would be possible to use some or all of the permitted amount of BLAGAB allowable losses against chargeable gains reallocated to the company under the provisions of TCGA92/S171A and S171C.