Taxation of Chargeable Gains Act 1992 Schedule 7AC paragraph 35

Recovery of charge postponed on transfer of assets to non-resident company

Paragraph 35 of Schedule 7AC deals with how a previously postponed capital gains tax charge is recovered when shares in a non-resident company — to which assets were originally transferred — are themselves disposed of under the substantial shareholding exemption.

• When a company transfers an asset to a non-resident company and the resulting capital gains charge is postponed under section 140 TCGA 1992, that postponed gain may later need to be brought back into charge.
• If the investing company subsequently disposes of shares in the non-resident company and that disposal qualifies for the substantial shareholding exemption (meaning no gain or loss arises on the share sale itself), the postponed gain on the original asset transfer is still recovered.
• The postponed gain is treated as accruing immediately before the exempt share disposal takes place, ensuring it cannot escape taxation simply because the later share sale is exempt.
• This provision prevents the combination of the section 140 postponement and the substantial shareholding exemption from being used together to permanently eliminate a chargeable gain on the original asset transfer.

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