Income Tax (Trading and Other Income) Act 2005 section 448

Restriction of losses on strips by reference to original acquisition cost

Section 448 restricts the amount of loss that can be claimed when disposing of a government securities strip, by limiting the loss to the difference between the disposal proceeds and the original acquisition cost.

• Where a strip is disposed of at a loss, the allowable loss is capped by reference to the original cost of acquiring the strip, not the higher deemed market value from the annual 5 April revaluation.
• If the deemed acquisition cost (i.e. the last 5 April market value) exceeds the original acquisition cost, the loss is reduced by the difference between the original acquisition cost and the disposal proceeds.
• If the deemed acquisition cost does not exceed the original acquisition cost, no loss is recognised at all on the disposal.
• The meaning of "making a loss on the disposal of a strip" is as defined in section 446(3) and (4), which deals with relief for losses on strips of government securities.