LAM03410 - Calculation of ‘I’ Income and chargeable gains: FA12/S73 Step 2: Calculating the shareholders’ share of BLAGAB chargeable gains TCGA92/S210A(2)

If the company has an I-E profit for the accounting period, the shareholder share is determined by TCGA92/S210A(10):

• find the percentage of that I-E profit that is not represented by the policyholder share in accordance with FA12/S103 (determines the policyholder’s share of I-E profit)
• then multiply that percentage by the amount of BLAGAB chargeable gains

See LAM06020 for full details of the FA12/S103 calculation.

Note that in computing the shareholders’ share of chargeable gains S210A(11) provides that the calculation for the period ignores:

• S212(3) losses carried back (deemed disposals)
• a non-trading deficit carried back under CTA09/S389

Applying this formula to an example:

Assume company A has a shareholders’ share of 87% determined under FA12/S103, an I-E profit of £160M, BLAGAB chargeable gains of £400M, current year allowable losses of £5M and brought forward allowable losses of £5M – net £390M. Non-BLAGAB allowable losses are £200M.

Applying 87% to the BLAGAB chargeable gains for the current period of £390M results in a shareholders’ share of BLAGAB chargeable gains of £339m. In this example, the allowable losses that are not BLAGAB allowable losses (Non-BLAGAB allowable losses) can potentially be set against the shareholders’ share of chargeable gains up to a total of £339M.

However, FA12/S95(2) allows the I-E profit to be reduced to nil, but no further. So in this example the maximum non-BLAGAB loss that can be utilised is £160M, reducing the I-E profit to nil. The unused non-BLAGAB allowable loss of £40M will be carried forward as a non-BLAGAB allowable loss.

With the figures in the example, there will not be a minimum profits charge notwithstanding that there is a policyholder share of profit before the offset of non-BLAGAB allowable losses. LAM07230.