CG16880 - Rebasing to 31/3/82: no gain/loss disposals

TCGA92/SCH3/PARA1

TCGA92/S55 (5)

TCGA92/SCH3/PARA1 applies to specified no gain/no loss disposals and enables the transferee to benefit from rebasing. This rule continues to apply for both capital gains tax and corporation tax purposes. Note that for disposals from 6 April 2008 rebasing applies automatically for capital gains tax and that the “kink test” (see CG16730+) and market value election (see CG16760+) provisions now apply only to companies.

The rule applies where -

• the person making the disposal (not being a no gain/no loss disposal) did not hold the asset on 31 March 1982, and
• every other disposal of the asset since that date was a no gain/no loss disposal.

If these conditions are satisfied, then paragraph 1 Schedule 3 deems the person, for the purposes of the rebasing provisions only, to have held the asset on 31 March 1982. There is similar provision for indexation purposes in Section 55(5) and (6) TCGA 1992. See CG16882.

Where a person is deemed to have held an asset on 31 March 1982 for rebasing or indexation purposes, that person can also be treated as having incurred enhancement expenditure which was in fact incurred after 31 March 1982 by a previous owner of the asset. That expenditure can accordingly be taken into account for indexation or rebasing purposes by the person making the eventual disposal, provided the general conditions for relief in Section 38(1)(b) TCGA 1992 are met. See CG16882.

The rebasing rules used to specify the no-gain/no-loss disposals but now picks up on the general definition in TCGA92/S288(3A). Not all the provisions listed are applicable apply to companies. The most commonly encountered provision will be the rule for intra group transfers (TCGA92/S171).

Valuation of shares following no gain/no loss transfers

(Originally published as Statement of Practice 5 of 1989)

Under TCGA 1992 s 35, Sch 3 (FA 1988 s 69, Sch 8) a person is treated as having held an asset at 31 March 1982 if he acquired it after that date by a transfer, or series of transfers, treated as giving rise to neither a gain nor a loss for Capital Gains purposes, from someone who did hold it at that date. Shares or securities of the same class in any company which are acquired in this way will be added to any shares or securities of the same class in the same company held by the transferee at 31 March 1982. Where, for rebasing and indexation purposes, it is necessary to determine the market value of the shares or securities at 31 March 1982 they will be valued as a single holding.

If the shares or securities in the relevant disposal represent some but not all of those valued at 31 March 1982 then the allowable cost or indexation allowance as appropriate will be based on the proportion that the shares or securities disposed of bears to the total holding.