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This page may need to be updated following changes made at Budget 2024.Ìý These changes can only be made after the Finance Bill 2024 has passed into law.Ìý

In general, when the disposal of an asset at a profit or gain gives rise to a tax liability,income tax has priority over Capital Gains Tax (“C³Ò°Õâ€�).Ìý

Sums chargeable as incomeÌý

Under , any part of the consideration for disposal of an asset which has either been charged to tax as income, or taken into account in computing income, should be excluded from the consideration for the disposal of the asset in computing the chargeable gain or allowable loss. This exclusion does not apply to:Ìý

Exclusion of expenditureÌý

Under , any sum which has been deducted in computing income or profits, or would have been so deducted if there had been sufficient income or profits, is not allowable as a deduction for CGT purposes. Special rules apply to expenditure which has qualified for capital allowances or renewals allowances, see CG15410.Ìý

is clear that no expenditure of a revenue nature is allowable. It expressly prohibits the allowance of any sum which would have been deducted in computing the profits of a trade, if the asset in question had been a fixed asset in use for the purposes of the trade, see Emmerson v Computer Time International Ltd (in liquidation) 50TC628.Ìý

Example 1Ìý

Mr R buys a picture for £100,000. He pays £5,000 to have it restored and reframed. At a cost of £10,000 he equips a room with controlled temperature and humidity for the preservation of the picture and has it fitted with suitable security devices. If Mr R then disposes of the picture, in computing the chargeable gain or allowable loss on the disposal:Ìý

Example 2Ìý

In 2018, Miss S buys a cottage which is not her main residence and incurs £20,000 in making good dilapidations. In 2020, she has the cottage rewired at a cost of £3,000 and has it redecorated throughout at a cost of £1,900. In 2022, she adds a garage at a cost of £4,000 and, in 2024, sells the whole asset.Ìý

In the computation of the chargeable gain or allowable loss on disposal, the allowable expenses are:Ìý

The cost of rewiring and decorating is not allowable, because if the cottage had been a fixed asset used for the purposes of a trade, this would not have been capital expenditure.Ìý

Income or profits not chargeable to Income TaxÌý

and set out that for CGT purposes, sums taken into account as receipts or as expenditure for income tax purposes include sums which would be so taken into account but for the fact that any profits or gains of a trade, profession, employment or vocation are not chargeable to income tax, or that losses are not allowable for those purposes.Ìý

Income or profits charged or chargeable to tax include income or profits taxed or taxable by deduction at source, even if tax is not in fact deducted on payment.Ìý

Payments on retirement or removal from office or employment â€� The £30,000 thresholdÌý

Where a lump sum payment is chargeable to tax under employment income by virtue of , see EIM13000+, the £30,000 threshold, which is not charged to employment income, is regarded as â€�money .... taken into account as a receipt in computing incomeâ€�within . It is therefore not chargeable to CGT as a gain arising from the disposal of a right under a contract of service.Ìý

Transactions in landÌý

The following rules apply for transactions in land from 5 July 2016. Please see BIM60300for advice on the transactions in land rules on or before 4 July 2016. Ìý

Where an agreement for the sale ofÌý

provides for additional consideration to be received on the happening of some future event, it is necessary to consider whether the transaction creates a liability under the transactions in land rules, see BIM60510.Ìý

Generally, where the transactions in land rules apply, any ‘gainsâ€� are chargeable to profits as trading income.Ìý

There is an exemption for any gains which are attributable to the period before the intention to develop is formed, see or , whilst the land functioned as a capital asset, see BIM60650.Ìý

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In such cases, you must establish the ‘first intention dateâ€�.The ‘first intention dateâ€� is the date at which it was first intended that the land would be developed or sold for the purpose of subsequent development.The date is a matter of fact which should be established and, if possible, agreed with the customer.Ìý

The value of the land at the ‘first intention dateâ€� should be established by reference to the Valuation Office Agency (for land in England, Wales or Scotland) or the Land & Property Services Northern Ireland (for land in Northern Ireland) or Shares & Assets Valuation (for land located elsewhere).The process for obtaining valuations and guidance on what to do if the customer does not accept a valuation is set out at CG74000C.Ìý

Where the amount of consideration paid on the initial sale is less than the market value determined for the ‘first intention dateâ€�, the consideration that should be brought into account for the disposal should be the market value as determined on the ‘first intention dateâ€�.In these cases, there is no need to determine the value of the right to deferred consideration.Ìý

Example 3Ìý

Mr S sells a piece of land to a developer in September 2020.He had previously farmed the land and the original cost of the land was £100,000.Ìý

He receives £1 million on completion of the contract and the right to a further sum dependent on the profits made when the developer sells the land after redevelopment (this amount is unascertainable deferred consideration).Ìý

Following redevelopment, Mr S receives a further £1.5m in April 2024.It is accepted that the transaction in land provisions apply and that the ‘first intention dateâ€� was the date of contract in September 2020.Ìý

The Valuation Office Agency states that the value of the land in September 2020 was £1.4 million.This figure is accepted by Mr S as being the value of the land when the intention to develop it was first formed.Ìý

The amount chargeable to CGT on the disposal in September 2020 is:Ìý

= Consideration (market value at September 2020) - Original costÌý

= £1.4 million - £100,000Ìý