Taxation of Chargeable Gains Act 1992 Schedule 7AC paragraph 36

Appropriation of asset to trading stock

Paragraph 36 deals with what happens when a company moves an asset into its trading stock and the substantial shareholdings exemption would otherwise shelter a gain or loss on that asset.

• Where a company originally acquired an asset other than as trading stock and later appropriates it into its trade as trading stock, special rules apply.
• If a hypothetical sale of the asset at market value at the time of appropriation would have produced a chargeable gain or allowable loss but for the substantial shareholdings exemption, the company is treated as having disposed of the asset at market value.
• This deemed disposal ensures the gain or loss is brought into account for chargeable gains purposes despite the exemption that would otherwise apply.
• The group transfer rules in section 173 for trading stock apply to this paragraph in the same way as they apply to the general appropriation rules in section 161.