Exempt assets or gains

Extract from Bloomsbury Professional Online “Capital Gains Tax”

Law Stated At: 1 January 2018

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The main exemptions applied to particular assets or gains by virtue of TCGA 1992 are set out in Table 1.1, in the order in which they appear in the legislation. Exemptions provided elsewhere in the tax legislation are set out in Table 1.2. There are also a number of special rules relating to particular assets (see Chapter 4) and a variety of reliefs which either provide a reduction in the CGT liability or defer it until a later date (see Chapters 11–19).



Exemptions provided by TCGA 1992

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Table 1.1

Exempt assets or gains TCGA 1992
Sterling is not an asset for CGT purposes (but currency other than sterling is an asset). s 21(1)(b)
Wasting assets: No chargeable gain accrues on a disposal of tangible movable property that is a wasting asset as defined, subject to certain exceptions (see 4.27). s 45
Winnings from betting, lotteries or games with prizes are not chargeable gains. s 51
Compensation or damages for any wrong or injury suffered by an individual in his person or in his profession or vocation are not chargeable gains, subject to ESC D33 (see 2.15). s 51
Death: The assets of which a deceased person was competent to dispose are deemed not to be disposed of by him on his death (see Chapter 7). s 62
Interests in settled property: No chargeable gain accrues on the disposal of an interest in a settlement by the original beneficiary or by any other person except one who bought the interest. The trustees must be resident in the UK. There are also other exceptions (see Chapter 8). s 76
Government stock and qualifying corporate bonds (QCBs): A gain accruing on a disposal of government-issued securities known as gilts, or any QCB whoever issued it, or of any option or contract to acquire or dispose of such assets is not a chargeable gain. The official list of gilts which are exempt from CGT is given at tinyurl.com/giltslist. s 115
Savings certificates and certain government securities are not chargeable assets, so that no chargeable gain accrues on a disposal. s 121
Business expansion scheme (BES) shares: A gain accruing to an individual on disposal of shares issued after 18 March 1986 for which tax relief was given under the BES and has not been withdrawn is not a chargeable gain. Special rules apply to losses on disposal of such shares. s 150
Enterprise investment scheme (EIS) shares: Gains accruing on the disposal after the end of the ‘relevant period’ of shares for which income tax relief under the EIS regime has been given (and not withdrawn) are not chargeable gains. Partial CGT exemption is available where income tax relief was restricted. Special rules apply to losses on disposal of such shares (see Chapter 16). ss 150A–150C
Seed enterprise investment scheme (SEIS) shares: Gains accruing on the disposal after the end of the ‘relevant period’ of shares for which income tax relief under the SEIS regime has been given (and not withdrawn) are not chargeable gains. Partial CGT exemption is available where income tax relief was restricted. Special rules apply to losses on disposal of such shares (see Chapter 16). ss 150E–150F
SEIS reinvestment of gains: Gains realised from disposals that are reinvested in SEIS shares in the same tax year, for which income tax relief is received and not withdrawn, are exempt or partially exempt from CGT (see Chapter 16). s 150G

Sch 5BB

Individual Savings Accounts and Personal Equity Plan investments: No tax is chargeable on either the investor or the account manager in respect of gains arising on ISAs, Junior ISAs or PEPs, provided certain conditions are met. s 151
Venture capital trusts: A gain accruing to an individual on a ‘qualifying disposal’ of ordinary shares in a venture capital trust is, subject to certain conditions, not a chargeable gain. Special rules apply to losses on disposal of such shares (see Chapter 16). s 151A
Substantial shareholdings exemption (SSE): A gain on a disposal of a ‘substantial shareholding’ (broadly, an interest of at least 10%) that has been held for at least 12 months is not a chargeable gain, provided various conditions are met (see Chapter 9). s 192A,Sch 7AC
Life insurance and deferred annuities: A gain accruing on a disposal of (or of an interest in) rights conferred by a policy of insurance or contract for a deferred annuity is not a chargeable gain unless the policy etc (or the interest in it) has been acquired for actual (not deemed) consideration. ss 204, 210
Main residence: All or part of a gain on the disposal of a dwelling house which has been the individual’s only or main residence at some time in the period of ownership will be exempt from CGT (see Chapter 11). s 222
Employee shares: Shares acquired through the adoption of ‘employee shareholder’ status acquired before 1 December 2016 are exempt from CGT on disposal, within limits (see 18.6). ss 236B–236G
Pension funds, purchased annuities, and superannuation funds: Gains on the disposal of investments held for the purposes of a registered pension scheme are not chargeable to CGT. No chargeable gain accrues on the disposal of a right to payment out of a qualifying superannuation fund. This covers the majority of occupational pension schemes. Also the disposal of rights to payments under purchased annuities or covenants not secured on property is exempt. ss 237, 271
Woodlands: Any part of the consideration for a disposal of woodland in the UK that is attributable to trees (including saleable underwood) growing on the land is excluded from the CGT computation together with the related costs. Where the occupier of woodlands manages them on a commercial basis with a view to the realisation of profits, consideration for the disposal of trees standing or felled or cut on the woodlands is excluded from the computation. Any capital sum received under an insurance policy relating to the destruction of (or damage to) trees or saleable underwood by fire or other hazard is also excluded. s 250
Debts: Where a person (A) incurs a debt to another person (B), no chargeable gain accrues to the original creditor (B) on a disposal of the debt or an interest in the debt, except in the case of a debt on a security. s 251
Foreign currency bank accounts: Gains and losses arising from withdrawals from foreign currency bank accounts are removed completely from the scope of CGT for individuals, trustees and PRs with effect from 6 April 2012. s 252
Social investments: Gains accruing on the disposal after the end of the ‘relevant period’ of investments (shares or bonds) for which income tax relief under the SITR regime has been given (and not withdrawn) are not chargeable gains (see Chapter 16). s 255B
Works of art etc: A gain is not a chargeable gain if it accrues on the disposal of assets such as works of art, historical building etc to which a conditional exemption from inheritance tax could or does apply, or the exemption for gifts to the nation applies. s 258
Chattels: A gain accruing on a disposal of tangible movable property is not a chargeable gain if the amount or value of the consideration for the disposal is not more than £6,000 (see 4.10). s 262
Motor cars: Vehicles which are commonly used as private motor cars are not chargeable assets, which means no chargeable gain or loss can accrue on their disposal. This exemption covers vintage cars, but not vehicles of a type not commonly used as a private vehicle and unsuitable to be so used. s 263
Renewables obligation certificates: Where an individual disposes of a renewables obligation certificate in relation to an electricity generation system installed at their home and other conditions apply, there is no chargeable gain. s 263AZA
Decorations for valour or gallant conduct: A gain accruing on the disposal of a decoration awarded for valour or gallant conduct is not a chargeable gain unless the taxpayer acquired it for a consideration in money or money’s worth. s 268
Foreign currency for personal expenditure: A gain accruing on the disposal by an individual of currency acquired for his own or his family’s or his dependants’ personal expenditure outside the UK is not a chargeable gain. s 269
SAYE savings schemes: Interest on certified SAYE savings arrangements within ITTOIA 2005, s 702 is disregarded for all purposes of CGT. s 271(4)

Other exemptions

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Table 1.2

Exempt assets or gains Source
Cashbacks: Lump sums received by a customer as an inducement for entering into a transaction for the purchase of goods, investments or services, and received as a direct consequence of entering into the transaction (eg a mortgage), are not considered to derive from a chargeable asset for CGT purposes, so that no chargeable gain arises. This practice does not extend to other incentive payments, or to ‘trail commission’ paid to investors which may be subject to income tax from 6 April 2013. SP 4/97, para 35

HMRC Capital Gains Manual at CG13025–CG13029

R&C Brief 04/13

Child Trust Funds: Assets held by a named child as account investments are regarded as held by him in a separate capacity from that in which he holds similar assets outside the CTF. The child will be treated as selling the account investments and reacquiring them in his personal capacity at their market value on attaining the age of 18. Losses accruing on account investments are disregarded for CGT purposes. Child Trust Funds Act 2004, s 13SI 2004/1450
Compensation paid by foreign governments: By concession, and subject to conditions, certain capital sums paid as compensation by a foreign government for the confiscation or expropriation of property outside the UK are not treated as giving rise to a chargeable gain. ESC D50
Lloyd’s underwriters’ special reserve funds: Profits and losses arising from disposal of assets forming part of a special reserve fund are excluded from CGT. FA 1993, Sch 20, para 9
Compensation for bad pensions advice: compensation for misleading pensions advice given between 29 April 1988 and 30 June 1994 is not a chargeable gain. FA 1996, s 148
Compensation to Equitable Life policy holders: compensation paid under the Equitable Life payments scheme are disregarded for the purposes of capital gains tax. SI 2011/1502

R&C Brief 26/11

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