What does section 195C of the Taxation of Chargeable Gains Act 1992 deal with?

Section 195C applies when a company receives mixed consideration — both licence interests and non-licence consideration such as cash — in an oil licence swap, and its no gain/no loss amount (N) exceeds the non-licence consideration (C). It determines the deemed acquisition cost of licences received and the treatment of the disposal.

How is the deemed acquisition cost of licences calculated under section 195C?

If the company acquires a single licence, the deemed cost equals N minus C. If multiple licences are acquired, the amount N minus C is apportioned across the licences in proportion to their respective values. Each licence's deemed cost is calculated as (N minus C) multiplied by that licence's value divided by the total value of all licences acquired.

Is the disposal of a licence under section 195C treated as a no gain/no loss disposal for all purposes?

The disposal is treated as giving rise to neither a gain nor a loss. However, it is specifically excluded from being classified as a formal no gain/no loss disposal for the purposes of the part-disposal and computational rules under section 56. This distinction affects which computational provisions apply to the transaction.

How does section 195C affect the indexation allowance calculation in a licence swap?

When calculating the indexation allowance under sections 53 and 54, any provision that would treat the other party to the swap as stepping into the receiving company's acquisition history must be disregarded. This ensures the indexation allowance is computed on the correct basis without inheriting the original acquisition details.

Taxation of Chargeable Gains Act 1992 section 195C

Company that receives mixed consideration: N exceeds C

Section 195C deals with the tax treatment of a company receiving mixed consideration (i.e. both licence interests and non-licence consideration such as cash) in a licence swap, where that company's no gain/no loss amount exceeds the non-licence consideration it receives.

Where the no gain/no loss amount (N) exceeds the non-licence consideration (C), the deemed acquisition cost of any licence received is based on the difference N minus C, apportioned by relative value if more than one licence is acquired.
The disposal of a licence by the receiving company under the swap is treated as giving rise to neither a gain nor a loss, but this treatment does not count as a formal "no gain/no loss disposal" for the purposes of the part-disposal rules in section 56.
When calculating the indexation allowance, any rule that would attribute the receiving company's original acquisition details to the other company acquiring a licence under the swap must be ignored.
Where the receiving company disposes of more than one licence, its no gain/no loss amount is the total of the individual no gain/no loss amounts for each licence disposed of.

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