Taxation of Chargeable Gains Act 1992 section Sch 2 para 21

Assets transferred to close companies

Section Sch 2 para 21 adjusts the time apportionment calculation for gains on shares in a close company where the gain reflects the growth in value of assets previously transferred into the company by a controlling person or someone connected with them.

• Where a person controlling a close company (or someone connected with them) has transferred assets to that company — at any time, including before 7 April 1965 — and the straight-line time apportionment method applies to a later disposal of shares in that company, a special rule adjusts the calculation.
• To the extent that the gain on the share disposal is attributable to a profit on the transferred assets, the time apportionment period is measured from when the assets were originally transferred into the company, not from when the shares were acquired.
• This means that any portion of the gain linked to assets transferred on or after 6 April 1965 is treated as a chargeable gain in full, because the entire apportionment period falls after that date.
• The rule does not apply where a loss, rather than a gain, arises on the disposal of the shares.