OT30075 - Capital Gains

Computational Points. Full Disposal. No Cash Consideration.

Where there is a licence swap, or the disposal of an entire interest in a licence by means of a farm-out, to which TCGA92\s194 applies, and there is no other consideration (e.g. cash), the deemed Nil consideration will mean that no chargeable gain can arise but the disposal may still produce an allowable loss.

TCGA92\s41 will operate to exclude expenditure in calculating losses to the extent of any capital allowances which have been, or may be, made for it. As CAA1990\s118A deems Nil consideration for capital allowances purposes on disposals equivalent to those within TCGA92\s194, all unrelieved qualifying expenditure on the licence interest (or part of it) disposed of will qualify for a balancing allowance.

For a licence interest held at 31 March 1982 and disposed of on or after 1 April 1985, there may still be an allowable loss by reference to Indexation Allowance assuming its value on 31 March 1982 exceeded original cost. That value is however reduced for Capital Allowances which have, or could have, been made on the original cost. Any losses will also need to be considered for restriction under TCGA92\s200 where the disposal occurs on or after 22 January 1990. TCGA92\s200 was repealed for disposals on or after 30 November 1993 as FA94\s93 prohibits the creation or augmentation of losses by indexation for disposals from that time except to the extent that such losses are preserved by TCGA92\s55(7)-(11).