Taxation of Chargeable Gains Act 1992 section 161

Appropriations to and from stock

Section 161 deals with the capital gains tax consequences when assets are moved into or out of trading stock, including an election that allows the capital gain to be rolled into the trading profit computation instead of being charged separately.

• When a non-trading asset is appropriated into trading stock, there is a deemed disposal at market value for capital gains purposes, triggering any chargeable gain or allowable loss at that point.
• When a trading stock asset is taken out of stock for another purpose, or retained on cessation of the trade, the value brought into the trading accounts for tax purposes becomes the acquisition cost for future capital gains calculations.
• An election is available (for trades carried on wholly or partly in the UK) to disapply the deemed disposal on appropriation into stock and instead reduce the market value used in the trading profit computation by the amount of the chargeable gain, effectively rolling the capital gain into the trading profit.
• Strict time limits apply to the election: for capital gains tax, by the first anniversary of the 31 January following the tax year of appropriation; for corporation tax, within two years of the end of the accounting period of appropriation — and if the trade is carried on in partnership, all partners must agree.