CG11700 - Introduction and computation: chargeable assets

Capital Gains Tax: what you pay it on, rates and allowances on Gov.uk provides an broad overview of chargeable assets.

Chargeable assets are assets that may give rise to a chargeable gain or an allowable loss. S21(1) states that for the purposes of the TCGA all forms of property are assets wherever they are situated are including:

  • options, see CG12300P
  • futures, see CG56000P
  • debts, see CG53400P
  • incorporeal property, sometimes known as ‘intangible assets’, see CG12000P. This covers assets with no physical substance, such as goodwill, copyright, patents and other types of intellectual property.
  • any currency other than sterling (the sterling being simply the unit of measurement of value), see CG78300P
  • created property such as business or professional goodwill, copyright or a lease (by the granting of it)
  • land and leases, see CG70205
  • shares and securities, see CG50200C.
  • rights over property

Guidance on the intangible assets regime for corporate businesses is given in the Corporate Intangibles and Research & Development Manual. The regime applies in respect of gains and losses arising to companies on intangible fixed assets that were acquired from an unrelated party or which came into existence on or after 1 April 2002. It does not apply to persons within the charge to Capital Gains Tax on chargeable gains.

Assets exempt in any circumstances

Although all forms of property, including debts and incorporeal property, are generally assets on which gains may accrue, see s21, there are some sections of the TCGA which state that gains which accrue on the disposal of certain limited classes of asset are not ‘chargeable gains’ and so those gains are not within the scope of the main charging provisions of the Act. This also means that where losses instead of gains arise on such assets, those losses are not allowable losses, s16(2).

Some assets are always exempt of a capital gains charge irrespective of how they were acquired. For example:

a) Private motor vehicles, see s263 and CG76906

b) Chattels with disposal consideration less than £6,000, see s262 and CG76550C

c) Chattels with a predictable life of 50 years or less (unless used for the purposes of a trade, profession or vocation), see s45 and CG76550C

d) Personal compensation or damages - sums obtained by way of compensation or damages for any wrong or injury suffered by an individual in his person or in his profession or vocation are not chargeable gains, see s51(2) and CG13030P.

e) Personal equity plans and individual savings accounts, see s151 and SAIM2310+.

f) Gilt-edged securities, see s115, Sch.9 and CG54900+

g) Savings certificates and non-marketable securities issued by the Department of National Savings, see s121. The exemption covers

·         Savings certificates (fixed interest)

·         Savings certificates (index-linked)

·         Yearly plan certificates

·         Children’s bonus bonds

·         Ulster savings certificates

·         Premium Bonds.

h) Qualifying corporate bonds, see s115 and CG53700C

i) Any option or contract to acquire or dispose of gilt-edged securities or qualifying corporate bonds

j) Business expansion scheme shares – see s150(2) and CG56900+.

k) SAYE (Save as you earn) schemes - see s271(4) and SAIM2300.

l) Stock Lending - see s263B and CFM74140.

m) Housing Associations - Chargeable gains which accrue to an approved housing association on property occupied by a tenant of the association are not charged to corporation tax on the association. The association must claim this treatment for each accounting period in which it is to apply, see s643 CTA10 and CTM40405+.

n) Self-build societies - see s652 CTA10 and CTM40470.

o) Annuities - 

·         No chargeable gain shall accrue to any person on the disposal of a right to, or to any part of, an annuity or lump sum payable out of a superannuation fund, see s237(a[CE(BA&I1] ).

·         No chargeable gain accrues on a disposal of, or of an interest in, an annuity (except a deferred annuity) which is granted in the ordinary course of a business of granting annuities on the life of any person, see s204(5) and CG69040P.

·         No chargeable gain accrues on a disposal of, or of an interest in, an annuity granted or deemed to be granted under the Government Annuities Act 1929, see s204(5)(b).

p) Deed of covenant - No chargeable gain shall accrue on the disposal of a right to, or to any part of, annual payments under a deed of covenant (which are not secured on property), see s237(c). The exemption is restricted to unilateral binding obligations, entered into without consideration, under which the annual payments are not secured on any property, see Rank Xerox Ltd v Lane 53TC185.

This list may not be exhaustive. If you encounter a scenario not covered in this list, it is important to consider whether the statute and guidance in this manual provides an answer.

Gains accruing on disposals of qualifying corporate bonds and other forms of debt issued by companies may be charged as income, see CG54100 and (for advice on the Corporation Tax treatment of debts) CFM3000+.

Assets that are sometimes exempt

There are some occasions where the disposal of an asset is exempt in the hands of one person, but chargeable in the hands of another. The difference lies in how and/or why the owner acquired the asset concerned.

a) Currency in sterling is not an asset for capital gains purposes, see s21(1)(b). It is the unit by reference to which capital gains are measured.

b) Foreign currency - Under s269, foreign currency that is sold by an individual at a profit does not give rise to a chargeable gain if it was acquired by for personal use outside the United Kingdom by the individual concerned or a family member, or on foreign currency bank accounts for whatever purpose the account is held. This includes expenditure on the provision or maintenance of any residence outside the United Kingdom. This exemption applies only to gains on foreign currency. Apart from this, currency (which includes foreign currency banknotes and foreign travellers’ cheques) is a chargeable asset, see CG78300P.

c) Life insurance policies and deferred annuities - sees210 and CG69050+.

d) Decorations for valour - see s268 and CG76875.

e) Windfalls - under s51(1), winnings from betting (including pool betting or lotteries or games with prizes) are not chargeable gains, and rights to winnings obtained by participating in any pool betting or lottery or game with prizes are not chargeable assets. For example, a gain or loss realised on the purchase of a share in the winnings of a ticket which has drawn a horse in a sweepstake is outside the scope of the tax. Where the prize takes the form of an asset, it should be regarded as having been acquired by the ‘winner’ at its market value at the time of acquisition.

f) Heritage property - see s258 and CG73300P.

g) Debts -No chargeable gain accrues on the satisfaction or the disposal of a debt by the original creditor or his or her personal representative or legatee, unless it is

the ‘debt on a security’, see s251(1) or a debt owed by a bank which is not in sterling, see s252, see CG53400P and CG78334+.

h) Only or main residence – see s222 to s226B and CG64200C.

This list may not be exhaustive. If you encounter a scenario not covered in this list, it is important to consider whether the statute and guidance in this manual provides an answer.