When does section 244 of the Taxation of Chargeable Gains Act 1992 apply?

Section 244 applies when the normal small part disposal deferral rules under sections 242 and 243 cannot operate because the consideration received for a part disposal of land exceeds the allowable expenditure attributable to the land, or where the allowable expenditure is nil. It provides an alternative election mechanism for the taxpayer.

What is the effect of making an election under TCGA 1992 section 244?

If the election is made, the sale proceeds for the part disposal are reduced by the full amount of allowable expenditure, creating a smaller chargeable gain. However, the trade-off is that the allowable expenditure used is permanently lost and cannot be deducted on the part disposal or any future disposal of the remaining land.

What are the time limits for making a section 244 election?

For capital gains tax, the election must be made by the first anniversary of the 31 January following the tax year of the part disposal. For example, a 2024/25 disposal has a deadline of 31 January 2027. For corporation tax, it must be made within two years of the end of the relevant accounting period.

What happens if no election is made under section 244?

If no election is made, the part disposal is taxed under normal capital gains tax rules. The allowable expenditure is apportioned between the part disposed of and the part retained using the standard apportionment formula, rather than being used to reduce the consideration in full on the part disposal.

Taxation of Chargeable Gains Act 1992 section 244

Part disposal: consideration exceeding allowable expenditure

Section 244 deals with the tax treatment of part disposals of land where the sale proceeds exceed the allowable expenditure (or where there is no allowable expenditure), and provides an alternative election to reduce the consideration rather than defer the gain.

The normal small part disposal rules (sections 242 and 243) cannot apply where the consideration for the part disposal exceeds the allowable expenditure or where there is no allowable expenditure at all
The recipient of the consideration may elect to reduce the sale proceeds by the amount of allowable expenditure, effectively creating a smaller chargeable gain on the part disposal
If this election is made, none of the allowable expenditure can be used as a deduction on the part disposal or on any future disposal of the remaining land
The election must be made within strict time limits: for capital gains tax, by the first anniversary of the 31 January following the tax year of the part disposal; for corporation tax, within two years of the end of the relevant accounting period

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