Calculation of corporate capital gains

Produced by Tolley in association with Jackie Barker of Wells Associates

The following Corporation Tax guidance note Produced by Tolley in association with Jackie Barker of Wells Associates provides comprehensive and up to date tax information covering:

  • Calculation of corporate capital gains
  • Calculation of gains
  • Disposal proceeds
  • Acquisition cost
  • Allowable expenditure
  • Indexation allowance
  • Allowable capital losses
  • Restriction on use of carried-forward capital losses ― from 1 April 2020
  • Transitional rules on corporate capital losses ― periods straddling 1 April 2020
  • Foreign currency
  • More...

Calculation of corporate capital gains

Calculation of gains

A separate computation will be required for each asset that is disposed of during a company’s accounting period. Generally, the date of disposal will be the date of the contract or if it is a conditional contract, the date that the condition is satisfied.

Where the disposal arises due to damage or destruction of the asset, or in other cases in which a capital sum is received in respect of the asset, the time of disposal is the date the capital sum is received.

For further detail on the time of disposal, see Simon’s Taxes C1.322.

For a proforma for calculating gains and losses, see Proforma ― corporate capital gains computation.

To calculate the gain, it will be necessary to determine the following:

  1. disposal proceeds

  2. acquisition costs

  3. allowable expenditure

  4. indexation allowance, up to 31 December 2017

Each of these elements is explained in detail below.

The other guidance notes in this section provide further details with regard to specific issues as they apply to companies.

Disposal proceeds

The disposal proceeds will normally be the actual consideration received or the open market value. Open market value will be used in certain circumstances such as where the disposal is not made on arm’s length terms or is between connected parties or where the consideration cannot be valued, such as on the exchange of assets. For larger value transactions, it is advisable to obtain an independent fiscal valuation report from an appropriately qualified professional. HMRC will often request supporting valuation details as part of an enquiry into a tax return which contains a more complex or valuable chargeable gain. Whilst it is by no means guaranteed that HMRC will accept the independent valuation, the valuer will use their experience in dealing with HMRC and their industry knowledge to improve the chances of the valuation being accepted. This consequently provides the company in question with a greater degree of certainty over the corporation tax liability for the year

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