Revenue Note for Guidance

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Revenue Note for Guidance


Computation of chargeable gains and allowable losses


This Chapter sets out the rules for the computation of chargeable gains and allowable losses for capital gains tax purposes.

By virtue of section 566 the provisions of Schedule 14, which sets out the rules which apply to the capital gains tax treatment of leases, are brought within the Capital Gains Tax Acts.

544 Interpretation and general (Chapter 2)


This section contains interpretational provisions and a number of general rules relating to the computation of chargeable gains and allowable losses. These rules include the provision that no deduction is allowable more than once and the provision relating to apportionments of consideration and expenditure where necessary.


(1) A “renewals allowance” is defined as a deduction which has been obtained for income tax purposes by reference to the replacement basis where capital allowances have not been claimed. A renewals allowance is treated for capital gains tax purposes as a deduction allowable against expenditure incurred on the asset which is being replaced although it is in fact expenditure on the acquisition of a new asset.

(2) For the purposes of the capital gains tax computational rules, references to sums taken into account in computing profits, gains or losses for income tax purposes include sums which would have been taken into account but for the fact that any profits of the relevant trade, profession or employment do not come within the charge to income tax or that losses are not allowable for income tax purposes.

(3) Income or profits taxed by deduction rank as income or profits charged or chargeable to tax.

(4) Where expenditure qualifies for deduction under different headings, only one deduction is allowable in the capital gains tax computation.

(5) Apportionments of consideration or expenditure may be made where necessary and, subject to any express provision of the Chapter, the method of apportionment is to be such method as appears just and reasonable.

(6) Section 557, which deals with part disposals, and all other provisions for apportioning deductible expenditure on a part disposal are to operate without regard to section 1028(5) (transfers between spouses) and section 597 (roll-over relief in the case of replacement of business assets) and any other provision which secures that neither a gain nor a loss arises on a disposal.

(7) Any income tax determination is conclusive for the purposes of capital gains tax in cases where liability to tax depends on the provisions of the Income Tax Acts. Thus, for example, a person cannot claim to have an item of expenditure allowed as a revenue expense for income tax purposes and then claim in relation to capital gains tax that it is capital expenditure which should be allowed so as to increase the cost of acquisition of the relevant asset.

(8) The provisions of the Capital Gains Tax Acts, including the provisions fixing the amount of consideration deemed to be given on a disposal or acquisition of an asset, are to be treated as having effect before 6 April, 1974 where it is necessary to compute a chargeable gain by reference to events and circumstances before that date.

Relevant Date: Finance Act 2021