Capital gains—rules determining time of disposal
Capital gains—rules determining time of disposal

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Capital gains—rules determining time of disposal
  • Disposal under a contract
  • Example: intermediate disposal
  • Example: self-cancelling contracts
  • Variation of a contract
  • Conditional contracts
  • Timing rules for deemed disposals
  • Capital sums derived from assets
  • Assets that are lost or destroyed
  • Assets that become of negligible value
  • More...

For a taxable capital gain to arise, there has to be a disposal, or a deemed disposal, of an asset. The taxpayer will need to establish when the disposal took place. This will determine when the tax must be paid, and in some cases will also decide:

  1. the amount of tax

  2. who has to pay it, and/or

  3. whether it is payable at all

This Practice Note describes the timing rules that apply to:

  1. assets that are disposed of under a contract

  2. deemed disposals, and

  3. options and forfeited deposits

In this Practice Note CGT means both capital gains tax and corporation tax on chargeable gains.

Disposal under a contract

The general rule is that when an asset is disposed of under an unconditional contract, disposal is treated as taking place at the time when the contract is made. This applies even if the asset is actually transferred at a later date. For example, when land is sold there is normally a contract, followed, at some later date, by a legal transfer. For CGT purposes the land is treated as having been disposed of on the date of the contract.

The corresponding acquisition of the asset by the buyer is also treated as taking place at the time when the unconditional contract is made. However, in the case of an acquisition by an individual of their only or main residence, the

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