Taxation of Chargeable Gains Act 1992 section 255B

Gains and losses on investments in social enterprises

Section 255B provides special capital gains tax rules for assets that have attracted Social Investment (SI) relief, covering how gains and losses are calculated, when gains are exempt, and how assets are identified on disposal.

• Where a disposal of an SI relief asset would produce a loss, the original cost is reduced by the amount of SI relief, thereby reducing, eliminating, or converting the loss into a gain.
• If an SI relief asset is disposed of more than three years after acquisition, any resulting gain is not a chargeable gain and is therefore exempt from capital gains tax, though this is subject to adjustment where maximum SI relief was not obtained.
• Despite the general rule that losses are not allowable where equivalent gains would not be chargeable, losses on SI relief assets can still be allowable losses for capital gains tax purposes.
• The normal share pooling and identification rules do not apply to SI relief assets; instead, special identification rules from the Income Tax Act 2007 are used to determine which assets have been disposed of and whether SI relief is attributable to them.