Commentary

C3.801 Assets appropriated to trading stock

Capital gains tax
Capital gains tax | Commentary

C3.801 Assets appropriated to trading stock

Capital gains tax | Commentary

Division C3.8     Appropriations to and from trading stock

For updates affecting this Division please see Part C0 Updates

Appropriations to and from trading stock

C3.801 Assets appropriated to trading stock

Where a chargeable asset (ie an asset whose disposal would give rise to a chargeable gain or an allowable loss) acquired by a person otherwise than as trading stock is subsequently appropriated by him for the purposes of his trade as trading stock (whether on commencement of trading or otherwise), the general rule is that he is treated as having sold the asset for its market value at the time of appropriation1. This gives rise to a chargeable gain or an allowable loss, and the amount to be brought into the computation of the profits of the trade in respect of the acquisition of the item of trading stock is that market value.

Assets appropriated to trading stock—electing to defer the charge

An alternative treatment is available if the taxpayer so elects2. For appropriations before 8 March 2017, it was possible to make the election no matter whether a gain or a loss arose but from that date the election is only available where a gain arises3. The consequences of such an election are:

  1.  

    •     no chargeable gain (or, before 8 March 2017 allowable loss) arises on the appropriation to trading stock, and

  2.  

    •     the market value of the asset to be included

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