Commentary

C2.107A Deferred unascertainable consideration—election for treatment of loss

Capital gains tax
Capital gains tax | Commentary

C2.107A Deferred unascertainable consideration—election for treatment of loss

Capital gains tax | Commentary

C2.107A Deferred unascertainable consideration—election for treatment of loss

Background

The provisions described in this article do not apply to persons chargeable to corporation tax1.

As indicated in C2.107, where the consideration for the disposal of an asset includes a right (R) to a deferred unascertainable consideration, the chargeable gain for the year of disposal includes the value at that time of R, which itself becomes a chargeable asset. Further gains and/or losses arise as and when the deferred rights are realised. If the total amounts realised are less than the value included in the original capital gain, a capital loss will arise on the disposal of asset R. The loss on the disposal of R can be carried back against the gain for the year in which the original disposal was assessed for losses arising after 9 April 2003, provided an election is made2.

Election for treatment of loss

A person ('the taxpayer') is entitled to elect for an allowable loss ('the relevant loss'), which would otherwise accrue to him in one tax year ('the year of the loss'), to be treated as accruing to him in an earlier tax year if certain requirements are met. The loss must accrue on a disposal by the taxpayer of a right which meets specified conditions, and the taxpayer must be within the charge to CGT for the year of the loss (in this legislation, 'year' means year of assessment). In addition, there are two conditions (conditions 1 and 2 below) that must both be

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