Taxation of Chargeable Gains Act 1992 section 40

Interest charged to capital

Section 40 provides a limited exception allowing companies to include certain borrowing interest costs as allowable expenditure when computing chargeable gains on the disposal of constructed buildings or structures.

• Where a company borrows money to fund construction of a building, structure or works, interest on that borrowing up to the date of disposal may be included as allowable expenditure in computing the chargeable gain.
• The relief does not apply to interest that has already been deducted from income or that constitutes a charge on income — there must be no double tax benefit.
• For accounting periods ending before 1 April 1981, the relief was more restrictive: only interest that the company had formally charged to capital qualified as allowable expenditure.
• This section is effectively obsolete for modern purposes, as it does not apply to interest referable to any accounting period ending on or after 1 April 1996, following the introduction of the loan relationships regime.