Disposal of premises

By Tolley in association with Jackie Barker of Wells Associates

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

  • Disposal of premises
  • Disposal proceeds
  • Part disposals
  • Allowable cost and enhancement expenditure
  • Rollover relief
  • Compulsory purchase
  • Interaction with capital allowances
  • Degrouping charges
  • Leases
  • Anti-avoidance ― transactions in land
  • Other tax implications

This guidance note explains the various aspects which need to be considered in relation to a company’s disposal of premises and the calculation of the chargeable gains position.

The calculation of the tax position for a disposal of land and / or buildings will generally be computed in the same way as any other asset. For a general overview of the capital gains position of a company and the calculations required, please refer to the Corporate chargeable gains guidance note.

Disposal proceeds

Where the disposal takes place between connected parties, or the asset is disposed of otherwise than by a bargain at arm’s length, the actual consideration is ignored and the market value of the asset is taken to be the proceeds for tax purposes.

TCGA 1992, ss 17–18

For further guidance on what constitutes a disposal between connected parties and circumstances where the market value of the asset should be substituted for actual consideration, please refer to the Connected party disposals, Gifts to shareholder family and Assets gifted to employees guidance notes.

Part disposals

Where only part of a company’s holding is disposed of, it is necessary to apportion the allowable cost under the part disposal rules using the following formula:

A = gross disposal proceeds

B = market value of the part retained at the date of disposal

TCGA 1992, s 42

There are special rules that may apply to the part disposal of land which provide relief against the potential chargeable gains.

Where the disposal proceeds are considered to be ‘small’, no disposal occurs. Instead, the disposal proceeds, less any allowable disposal costs, are deducted from the allowable expenditure when calculating the gain or loss on the disposal of the remaining land.

In order for the proceeds to be ‘small’ the following

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