LAM03620 | Calculation of ‘I’ Income and chargeable gains: Chargeable gains from venture capital limited partnerships TCGA92/SCH7AD: Disposals

Disposals by the company of its interest in the partnership

Where Schedule 7AD applies, the insurance company’s interest in the relevant assets of the partnership is treated as a single asset. If the company disposes of all or part of its interest in the partnership then this is a disposal of the single asset. The normal capital gains rules apply to that single asset, including the apportionment rule in TCGA92/S52(4) and the connected party rules.

Where the partnership disposes of assets that are not relevant assets, the standard partnership rules apply as set out in TCGA92/S59, extended to cover limited liability partnerships by S59A. Statement of Practice D12, setting out practical aspects of calculating partnership gains, also applies.

Deemed disposals of the single asset in case of distributions

Just as there is an acquisition or enhancement of the deemed single asset when the company contributes capital to the partnership, there is a deemed disposal or part-disposal of the single asset when the company receives a distribution from the partnership which includes proceeds from the sale or redemption of the relevant assets TCGA92/SCH7AD/PARA5.

The consideration received for this disposal is simply that part of the distribution not consisting of income or proceeds from the sale or redemption of QCBs. This information should be readily available.

Deemed disposals: excessive delay in distributing proceeds

There is an anti-avoidance provision in TCGA92/SCH7AD/PARA5(3) which applies if the partnership does not distribute the proceeds from the sale of chargeable assets within 12 months of the sale.

Then, the company is treated as receiving the proceeds of the sale at the later of:

• the end of the partnership’s accounting period following that in which the disposal occurred, and

• 6 months after disposal.

When the distribution is actually made, PARA5(5) ensures that a further chargeable gain or loss does not arise on the same disposal of partnership assets.