CG13155 - Introduction and computation: occasions of charge: assets lost/destroyed/negligible value: involuntary transfers

Whether an involuntary transfer will constitute听a disposal听

Involuntary transfers are disposals for Capital Gains Tax purposes if听

  • the original owner's title to the asset passes to a new owner, for example, a local authority after a compulsory purchase (see鈥�CG60660鈥痑苍诲鈥�CG72100+), or听

  • the original owner's title comes to an end听under a particular law or statute, see, for 别虫补尘辫濒别,鈥赌痓别濒辞飞.听

听

Involuntary transfers are not disposals if听

  • the original owner retains听their title to the asset, but loses possession, and听

  • the new owner acquires听a new and separate title.听

Fairweather v St Marylebone Property Co Ltd [1963] AC 510听

听

It is always important to ascertain听the correct legal position. In鈥�this case, it was held that a squatter had obtained a new and separate title under the Statute of Limitations and had not taken a 'Parliamentary conveyance' from the original owner.听听

The operation of the Statute of Limitations was said to be merely negative. It destroyed the leaseholder's title to the land but did not vest it in the squatter. Therefore听this was an involuntary transfer which was not a natural disposal but, nevertheless, the asset was 'entirely lost'.听

A leaseholder in this situation could claim relief for the loss of their interest in the asset under s24(1) TCGA1992.听

Theft of property听

Theft of an asset is not the 'entire loss' of that asset. After the theft, although the victim has given up actual possession of the asset, they normally retain听the right to recover possession.听The asset has not been completely lost or destroyed, so s24(1) TCGA 1992 will not apply.听

If the asset is found and returned to the rightful owner, HMRC听take the view that the beneficial interest in the asset was not lost during the period when possession was lost. The return of the stolen asset is clearly not 'compensation' because it is the asset itself, so that s22 TCGA听1992 (see鈥�CG12940+) has no effect. For Capital Gains Tax purposes,听HMRC听would not take a charge.听

If, however, there is no likelihood that the asset will be recovered, a negligible value claim under s24(2) TCGA听1992 would be competent. This would not apply where the loss has been covered by insurance etc. In those circumstances we would regard the charge under s22(1) TCGA听1992 as overriding the claim under s24(2) TCGA听1992.听