Clause 50 - Deduction of personal losses from gains treated as accruing to settlors

Part of Finance Bill – in a Public Bill Committee at 5:15 pm on 21st May 2002.

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Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party 5:15 pm, 21st May 2002

With this it will be convenient to discuss the following: Amendment No. 53, in schedule 11, page 185, line 22, leave out from beginning to end of line 44 on page 187 and insert—

'(2) After subsection (5) (computation of tax in cases where gains treated as accruing to settlor etc in respect of trust gains) insert—

''(6) Subsections (4) and (5) above shall cease to have effect for the year 2003-04 and subsequent years of assessment.''.'.

New schedule 1—Chargeable gains: set off of losses treated as accruing to settlors—

Introduction

1 The Taxation of Chargeable Gains Act 1992 (c. 12) is amended in accordance with paragraphs 2 to 6.

Section 2

2(1) Section 2 (persons and gains chargeable to capital gains tax, and allowable losses) is amended as follows.

(2) In subsection (2) (computation of capital gains tax), for the word ''and'' at the end of paragraph (a) substitute—

''(aa) any attributed loss accruing to that person, and''.

(3) After that subsection insert—

''(2A) Where on a disposal a loss accrues to trustees of a settlement in circumstances where, had it been a gain that gain would have been attributed to another person by virtue of sections 77 or 86, then that person may elect for that loss to be an attributed loss accruing to that person for the purposes of subsection (2) above for the year of assessment in which the disposal occurs.

(2B) Attributed losses must be deducted first from any gains accruing to a person by virtue of sections 77 and 86 chargeable for the year in question before they may be deducted from any other chargeable gain.''.

Section 77

3 In section 77 (charge on settlor with interest in settlement), in subsection (1) at the end insert ''No deduction of any loss shall be made by the trustees in respect of any disposal which gives rise to a loss which the settlor informs them is to be regarded as an attributed loss for the purposes of section 2(2).''.

Section 86

4 In section 86 (attribution of gains to settlors with interest in non-resident or dual resident settlements), after subsection (1), insert—

''(1A) For the purposes of subsection (1)(e) above no account shall be taken of any disposal which gives rise to a loss which the settlor informs the trustees is to be regarded as an attributed loss for the purposes of section 2(2).''.

Section 86A

5 In section 86A (attribution of gains to settlor in section 10A cases), after subsection (8) insert—

''(8A) For the purposes of this section, no account shall be taken of any disposal which gives rise to a loss which the settlor informs the trustees is to be regarded as an attributed loss for the purpose of section 2(2).''.

Section 87

6 In section 87 (attribution of gains to beneficiaries), before subsection (4) insert—

''(3Z) In making any computations under this section, no account shall be taken of any disposal which gives rise to a loss which the settlor informs the trustees shall be regarded as an attributed loss for the purpose of section 2(2).''.

Commencement

7 This Schedule applies to persons and gains chargeable to capital gains tax and allowable losses in the year 2003-04 and subsequent years of assessment.

Election for Schedule to apply for years earlier than 2003-04

8(1) This Schedule also applies, if the person so elects, in relation to chargeable gains and attributed losses accruing to a person in any of the years of assessment 2000-01, 2001-02 and 2002-03.

(2) An election under this paragraph—

(a) must be made by notice given to an officer of the Board no later than 31st January 2005;

(b) where attributed losses may be regarded as arising in respect of two or more settlements, may be restricted to those regarded as arising in respect of the settlement or settlements specified in the election.

(3) All such adjustments shall be made, whether by way of discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to an election under this paragraph.

(4) Where—

(a) a person makes an election under this paragraph for any one or more of the years of assessment 2000-01, 2001-02 and 2002-03, and

(b) the effect of the election, or (as the case may be) both or all of them taken together, is to increase the total amount of tax that the person is entitled to recover from the trustees of a particular settlement for those three years under section 78(1)(a) of the Taxation of Chargeable Gains Act 1992 (c. 12) or paragraph 6 of Schedule 5 to that Act,

the trustees of that settlement must join in the election, or (as the case may be) each of them that has that effect or contributes to it.'.