CG16760 - Rebasing to 31/3/82: elections: introduction
TCGA92/S35 (5)
For gains on disposals on or after 6 April 2008 that are charged to capital gains tax the use of 31 March 1982 value in computing gains on assets held at that date is mandatory. Therefore the following guidance on elections now only applies to disposals by companies that pay corporation tax on their chargeable gains.
For disposals on or after 6 April 1988 of assets held on 31 March 1982, a company can elect under TCGA92/S35 (5) to have gains and losses on all assets covered by the election computed by reference to 31 March 1982 values alone, that is without the restrictions imposed by the kink test. But
- there is a time limit for making this election and it is irrevocable, see CG16780
- indexation allowance is given by reference to the value of the asset at 31 March 1982 (and not by reference to the relevant allowable expenditure incurred up to 31 March 1982 if greater)
- certain assets are excluded from the election, see CG16780
- there are special rules for groups of companies, see CG16780
- there are anti-avoidance provisions for groups of companies, see CG16850.
Capacity in which election made
Who should make election: special cases
Consequences
Example - election in force
Capacity in which election made
An election made by a company in one capacity does not cover disposals made by it in another capacity, TCGA92/S35 (7). For example an election made by a company in respect of assets it owns directly will not cover its interest in assets held as trustee or partner. A separate election is required in respect of each settlement or partnership. It follows that there will be a separate time limit for making an election for each holding of assets which a company holds in different capacities. Companies that hold assets in different capacities should indicate at the time they make an election in what capacity it should be regarded as applying.
Who should make election: special cases
In the case of an assessment on a UK resident shareholder or participator under TCGA92/S13 (non-resident companies) an election, if one is to be made, should be made by the person making the disposal: the non-resident company. Any difficulties over the making of such elections should be referred to Capital Gains Technical Group.
Consequences
Provision is made for all necessary adjustments to be made to give effect to an election. This is necessary because an election covers not only disposals made after the election has been made but all disposals on or after 6 April 1988. Therefore the election might be made after a relevant assessment had become final and conclusive.
Example - election in force
Asset acquired by a company costing £14,000 on 6 April 1964. 31 March 1982 market value £20,000. Asset sold for £10,000 on 6 March 2013. Rebasing election made.
| - | - | £ |
|---|---|---|
| - | Disposal proceeds | 10,000 |
| less | Cost (value at 31 March 1982) | 20,000 |
| - | Unindexed loss | (10,000) |
No comparison is made with the loss made by reference to the original cost of the asset.
For companies within the charge to Corporation Tax indexation was frozen from 1 January 2018 so for any disposals after 31 December 2017, of assets held before this time, indexation is calculated to December 2017 and not the month of disposal. In this example since there is an unindexed loss indexation cannot increase the loss (CG17700). However if there was an unindexed gain then indexation could reduce or eliminate the gain, further examples in CG17721.