OT30402 - Capital Gains

Loss Restrictions.

A loss accruing on the disposal of an "oil industry asset" on or after 22 January 1990 and before 30 November 1993 may need to be restricted where the following conditions are fulfilled:

1. the person making the disposal held the asset at 31 March 1982, or is deemed to have held it on that date through having acquired it under a no gain/no loss disposal or following a series of such disposals after 31 March 1982
2. a loss would otherwise accrue on the disposal i.e. on the normal rules taking March 82 value plus indexation
3. the normal rebasing rule is disapplied under the "kink test" because a smaller loss or a gain accrues using cost (with indexation based on March 82 value).

In that event a gain or loss is calculated on the basis of actual cost and with indexation from March 82 on actual cost. This is known as the non-rebased loss or gain.

Where the "non-rebased loss" is smaller then under the normal rule at b. above, the allowable loss is restricted to that amount.

Where there is a "non-rebased gain", the transaction is treated as producing no gain/no loss.