Commentary

C3.1913 CGT relief on disposals of investments in social enterprises

Capital gains tax
Capital gains tax | Commentary

C3.1913 CGT relief on disposals of investments in social enterprises

Capital gains tax | Commentary

C3.1913 CGT relief on disposals of investments in social enterprises

Where an asset to which social investment income tax relief (SITR) is attributable (see Division E3.9 and C3.1912)1 is disposed of three years or more after acquisition, any gain accruing on the disposal is not a chargeable gain2.

There is no requirement to make a claim; the gain is automatically exempt. This is supported by the archived HMRC guidance (see 'How to claim tax relief if you're an investor'). The current guidance is silent on this point, but the legislation is clear. However, the gain is only exempt where a claim has been made for income tax relief on the investment. If no claim is made, then any gain on the subsequent disposal of the investment is chargeable to capital gains tax3.

SITR CGT disposals—losses

Despite the fact that such a gain is exempt from tax, if the disposal creates a loss it is an allowable loss4. Where there would be a loss on disposal, the consideration for the asset is treated as reduced by the amount of the income tax relief in order to avoid double tax relief. This will reduce, or possibly eliminate the loss5.

SITR CGT disposals—share identification rules

The asset identification rules contained in the social investment income tax relief provisions (see E3.925) apply to determine which assets from within a social holding

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