OT30453 | Capital gains: extension of ring fence: the ring fence rules

The ‘ring fence’ gains and losses in an accounting period are aggregated and treated as a single gain or loss on the notional disposal of an asset. (No further indexation allowance arises as a result of that notional disposal). A resulting gain is completely within the ring fence and can be offset by ring fence capital losses brought forward, but not non-ring fence losses of the same, or an earlier period.

Similarly, a ring fence loss is allowed only against future ring fence gains but not non- ring fence gains of the same, or a later period with one exception.

If, within two years of the end of the chargeable period, the company claims for the whole, or a specified part, of the loss to be treated as a non-ring fence loss of that period it is available against any non-ring fence gains of that period, or a later period.

A ring fence loss arising on a disposal to a connected person (defined in TCGA92\S286) is not aggregated under TCGA92\S197(3)(b) with other ring fence losses of the period. It can however be allowed under TCGA92\S18(3) against gains accruing from ring fence disposals to the same person in that or a later period (TCGA92\S197(6)).

Where such losses exceed gains of the period against which they can be allowed the company may claim, within two years of the end of the chargeable period, for the whole, or a part, of the loss to be treated as a non-ring fence loss of the period. That loss is then available against other non-ring fence gains of that period (or a later period) on transactions with the same person (TCGA92\S197(7)).