188体育

TCGA92/S122 (4)

It is possible that the value of the small capital distribution may be greater than the allowable expenditure. In this case TCGA92/S122 (2) does not apply. However, the taxpayer can make an election under TCGA92/S122 (4) to reduce the capital distribution by the amount of the allowable expenditure. This allowable expenditure is then no longer available to set off against any later disposal of the shares. Although there is no explicit reference to small capital distributions in Section 122(4) the election can only be made if the distribution is small. This was confirmed by the Court of Appeal in the case of O鈥橰ourke v Binks 65TC165.

Section 104 holding

The effect of an election under TCGA92/S122 (4) will be to reduce the pool of qualifying expenditure and the pool of indexed expenditure to nil.

1982 holding
An adjustment is required to the 31 March 1982 value of the shareholding if TCGA92/S122 (4) has applied to a small capital distribution made after 31 March 1982 and before 6 April 1988, TCGA92/SCH3/PARA4 (2). The 31 March 1982 value is reduced by the amount of the allowable expenditure which has been set against the earlier gain. This adjustment only applies to disposals made on or after 6 April 1989, see CG16960.

Example

The taxpayer has a holding of shares in Z ltd at 31 March 1982 original cost 拢6,000. After 31 March 1982 and before 6 April 1988 Z ltd makes a capital distribution of 拢10,000. This is a small capital distribution but it is greater than the taxpayer鈥檚 allowable expenditure. The taxpayer makes a claim under TCGA92/S122 (4). The disposal proceeds are reduced by 拢6,000.

In 1992 the taxpayer sells the rest of the shareholding. The shares have an agreed 31 March 1982 value of 拢50,000. That 31 March 1982 value is reduced by the amount of the earlier Section 122(4) claim. The value becomes 拢50,000 - 拢6,000 = 拢44,000.