542 Time of disposal and acquisition

Summary

This section sets out rules in certain cases for determining the time at which an acquisition and disposal of an asset takes place. For a disposal under contract the time of disposal and acquisition is normally the time the contract is made, but where the contract is subject to a condition, the time of disposal and acquisition is when the condition is satisfied. On a compulsory acquisition of land by an authority possessing the relevant powers, the time of disposal and acquisition is the time at which the compensation is agreed on or, if earlier, the time when the authority enters on the land under its powers. However, where the disposal is under a compulsory purchase order the chargeable gain (if any) will be deemed to accrue either on the date the compensation is received or immediately before a person’s death if the compensation has not been received at the date of that person’s death. Where compensation or insurance money is received in respect of damage to an asset, this is treated as a disposal of the asset under section 535(2)(a). In this case the time of disposal is the time the money is received.

In other cases not specifically mentioned in the section, the time of disposal and acquisition is determined on the relevant facts. In the case of a gift (including a gift in settlement), the time of disposal and acquisition will normally be the time the property effectively passes.

Details

(1)(a) In the case of a disposal of an asset by way of an unconditional contract, the time of disposal and acquisition is the time at which the contract is made and not, if different, the time the asset is conveyed.

(1)(b) If the contract is subject to a condition, the time of disposal and acquisition is the time when the condition is satisfied.

(1A)&(1B) Notwithstanding subsections (1)(c) and (1)(d), the time of the disposal of land which as been compulsorily acquired and the time of the deemed accrual of a chargeable gain will be the time when the compensation amount is received, where that amount is received on or after 1 January 2016.

(1)(c) Where an interest in land is acquired by an authority under compulsory purchase powers, the time of disposal and acquisition is the time at which the compensation is agreed on or, if earlier, the time when the authority enters on the land under its powers. If, failing agreement between the parties, the amount of the compensation is fixed at arbitration, the time of the disposal is the time when the arbitrator makes his determination. In such a case, the time of the disposal does not change even though the amount of the compensation may be varied on appeal at a later date.

(1)(d) Where the disposal is under a compulsory purchase order, the chargeable gain (if any) will be deemed to accrue —

• on the day on which the payment of the compensation is received by the person who made the disposal, or
• immediately before the person’s death if the compensation had not been received by him or her at the date of his or her death.

(2) In the case of capital sums received as compensation or insurance payment in respect of damage to an asset or capital sums received for forfeiture of rights or for the use or exploitation of an asset, the time of the deemed disposal (under section 535) is the time of the receipt of the capital sum.

Relevant Date: Finance Act 2021