Taxation of Chargeable Gains Act 1992 Schedule 5AAA paragraph 21

Deemed disposal: payments not otherwise taxable where value derived from direct or indirect disposals of UK land

Paragraph 21 creates a deemed disposal mechanism to bring into the capital gains tax net certain revenue-nature payments received by participants in qualifying funds or companies that derive value from UK land but would otherwise escape both income tax and capital gains tax.

• Where a participant receives an amount representing value derived from UK land disposals, and that amount is revenue in nature but not subject to income tax or corporation tax, a deemed disposal of the participant's fund units or company interests is triggered
• For qualifying funds, the participant is treated as having sold and immediately reacquired their units at market value just before and just after the relevant time, crystallising a chargeable gain
• For qualifying companies, the same deemed sale and reacquisition mechanism applies to the participant's rights and interests in the relevant entity
• If part of the value is already subject to income tax or corporation tax, the deemed disposal market value is reduced on a just and reasonable basis to avoid double taxation on that portion