Taxation of Chargeable Gains Act 1992 section 255C

Application of section 255B(2) where maximum SI relief not obtained

Section 255C reduces the capital gains tax exemption on disposal of social investment relief assets where the investor did not obtain the full amount of SI income tax relief available.

• Where an individual received SI income tax relief on acquiring an asset, but the actual tax reduction was less than the maximum possible (calculated as the relievable amount multiplied by the SI rate), this section applies to restrict the CGT exemption.
• The restriction does not apply if the shortfall in relief arose solely because the individual did not have enough income tax liability to absorb the full relief — in that case, the full CGT exemption under section 255B(2) still applies.
• When the restriction does apply and the individual disposes of the asset at a gain, the exempt gain is scaled down by multiplying it by the fraction: actual tax reduction divided by (relievable investment amount × SI rate).
• The effect is that only the proportion of the gain attributable to the investment that actually benefited from SI income tax relief is exempt from capital gains tax; the remainder is chargeable in the normal way.