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CG73632 | Dwellings subject to ATED: computation of gains and losses: chargeable interests acquired after 5 April of the relevant year

From HM Revenue & Customs · Capital Gains Manual

The computational stages for disposals of single-dwelling interests acquired on or after 6 April of the relevant year are as follows:

  1. Compute the gain or loss on the disposal under normal capital gains tax rules, (so indexation is not available). Where a company makes the disposal to another company in the same group TCGA1992/S171(2)(ba) prevents the disposal being treated as made at no gain/no loss value and the market value rule applies instead.

  2. Split the gain/loss under (1) above into the part that is ATED-related and the part (if any) that is not.

The ATED-related part is the fraction of gain/loss given by the formula CD/TD. CD = the days in the period from the date of acquisition to the day before the date of disposal that are chargeable to ATED. TD = the total number of days in that period.

Where CD subsequently changes because a claim to relief from ATED has been made or altered, TCGA92/Sch4ZZA, para 7 permits all necessary adjustments to the capital gains computations.

  1. If there is a loss under (2) above and a part of it is not ATED-related, that part is the non ATED-related loss on the disposal.

  2. If there is a gain under (2) above and a part of it is not ATED-related, that part is reduced by a fraction of the indexation allowance (IA) that would have been due disregarding Schedule 4ZZA. The fraction is (TD - CD)/TD. CD and TD are as at (2) above.

With the changes in the threshold amounts effective in April 2015 and April 2016 if the acquisition cost of the property was say £750,000 it would potentially be within the scope of ATED related Capital Gains Tax for a disposal on or after 6 April 2016 because it would be within scope of ATED from 1 April 2016.