760 Capital sums: effect of death, winding up and partnership changes

Summary

This section supplements section 757 under which the tax chargeable in respect of capital sums received for the sale of patent rights is spread over subsequent years. The provisions of the section are necessary to secure that a part of the tax is not lost where the person chargeable dies or a company is wound up so that one or more of the subsequent assessments cannot be made. The section provides that, in the case of the death of an individual or the winding-up of a company, no annual tax charge under section 757 is to be made for years after that in which the event occurs. Instead, the outstanding balance of the capital sum being charged on the basis of being spread forward is assessed in one amount for the year in which the death takes place or the winding-up commences. The section applies also, with suitable modifications, to partnerships.

Details

Married couples/civil partners jointly assessed

(1) In the section references to tax paid or payable by a person who is jointly assessed include references to tax payable by the person’s spouse or civil partner.

Year of death or winding-up

(2) In the case of the death of an individual taxpayer or the winding-up of a company or other body corporate, no annual charges under section 757 are to be made for years after that in which the event occurs. The whole outstanding balance of the capital sum which is being charged on the basis of being spread forward is to be assessed in one amount for the year in which the death takes place or the winding-up commences.

Death of an individual

(3) In the case of the death of an individual, the individual’s executors have the right to reduce the tax payable by virtue of subsection (2), so as not to exceed the total tax which would have been payable if the additional amount rendered chargeable for the year of death had been allocated in equal parts as income of the years from (and including) the year in which the original capital sum was received to (and including) the year of death.

Partnerships

(4) The section provides that the provisions of subsection (2) in relation to the winding-up of a company are to apply also to the discontinuance of a trade carried on jointly by 2 or more persons in partnership. The additional sum chargeable (as representing the onesixth parts of the capital receipt originally allocated to years of assessment later than the year in which the discontinuance occurs, or is treated as occurring) is to be apportioned among the partners immediately before the discontinuance according to their several interests in the partnership profits. Each partner is entitled to claim the same modification of his/her own liability on the basis of a spread over the period from the date of receipt to the date of partnership change as can be claimed by the executors of an individual who dies.

Relevant Date: Finance Act 2021