649 Companies chargeable to capital gains tax in respect of chargeable gains accruing on relevant disposals

Summary

This section provides that companies are chargeable to capital gains tax (and not corporation tax) in respect of gains accruing on disposals of development land. It also provides for certain rules relating to such disposals in the case of company groups’.

Details

Charge to capital gains tax

(1) Whereas it is usually the case that a company’s chargeable gains are subject to corporation tax (see section 78), this section provides that where a gain accrues to a company from a disposal of development land, the company is chargeable to capital gains tax (and not to corporation tax) in respect of the gain.

Groups of companies

(2) Where capital gains tax is chargeable on gains accruing to a company on disposals of development land, then, sections 617 (transfers of non-trading stock within a group), 621 (depreciatory transactions in a group), 622 (dividend stripping), 623 (company ceasing to be member of group), 624 (exemption from charge under section 623 in case of certain mergers), 625 (shares in subsidiary member of group) and 626 (tax on company recoverable from other members of group) apply to capital gains tax chargeable on the company as they apply in relation to corporation tax on chargeable gains.

(3)(a) Where a company which is or has been a member of a group of companies disposes of development land, and that land when it was acquired by the company had not been development land and had been acquired from another company within the group at a time when both companies were members of the group, the chargeable gain is computed as if the group members were a single person and as if the acquisition of the land by the group taken as a single person had been the acquisition of the land by the member disposing of it.

(3)(b) Provision is made, however, to guard against the imputing of an excessive period of ownership, and possibly an excessive chargeable gain, on a disposal. If, at a time earlier than the disposal, another date of acquisition, which is later than the date on which the asset first entered the group as a whole, is provided for under section 618(2) (transfer of trading stock within group) or 623 (company ceasing to be member of group), that later date is treated as the start of the period of ownership of the asset.

Relevant Date: Finance Act 2021