What does paragraph 9 of Schedule 4ZZA TCGA 1992 do?

Paragraph 9 of Schedule 4ZZA requires that where capital allowances have been claimed on an asset, the allowable expenditure used in computing a chargeable gain on disposal must be reduced by the total capital allowances given. This prevents a taxpayer from obtaining double tax relief on the same expenditure under United Kingdom law.

How do capital allowances affect the base cost for chargeable gains purposes?

Capital allowances reduce the allowable base cost of an asset when calculating the chargeable gain on disposal. The original cost is reduced by the total capital allowances claimed, resulting in a lower base cost. This typically produces a larger chargeable gain or a smaller allowable loss on the subsequent disposal of the asset.

Why does United Kingdom law require a reduction in allowable expenditure for capital allowances already claimed?

United Kingdom law requires this reduction to prevent double relief. Without the adjustment, a taxpayer could claim capital allowances against income tax or corporation tax profits and then also deduct the full original cost when computing the chargeable gain. Paragraph 9 ensures expenditure is not relieved more than once across the two regimes.

When was paragraph 9 of Schedule 4ZZA introduced and by which legislation?

Paragraph 9 of Schedule 4ZZA was introduced by the Finance Act 2019 as part of broader reforms contained in Schedule 1 to that Act. It forms part of the United Kingdom's legislative framework ensuring consistency between capital allowances relief against trading profits and the computation of chargeable gains on disposal of qualifying assets.

Taxation of Chargeable Gains Act 1992 Schedule 4ZZA paragraph 9

Capital allowances

Paragraph 9 of Schedule 4ZZA deals with how capital allowances interact with the computation of chargeable gains when an asset has benefited from capital allowances deductions.

Where capital allowances have been claimed on an asset, the allowable expenditure for chargeable gains purposes must be reduced by the amount of those allowances.
This adjustment prevents a taxpayer from obtaining tax relief twice — once through capital allowances against income and again through an inflated base cost reducing a chargeable gain.
The reduction applies to the expenditure that would otherwise be deductible when calculating the gain or loss on disposal of the asset.
This provision was introduced by the Finance Act 2019 as part of the broader reforms set out in Schedule 1 to that Act.

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