Definition
A chargeable gain is the taxable profit a company makes when it sells or otherwise disposes of an asset, such as property or shares, for more than it cost. Companies pay Corporation Tax on chargeable gains, not Capital Gains Tax.
How it is worked out
A company’s chargeable gain is the sale proceeds less:
- what the asset cost, including the costs of buying it;
- money spent improving it;
- the costs of selling it;
- indexation allowance, an adjustment for inflation that is frozen at December 2017, so it only helps with assets owned before then.
The gain is added to the company’s other profits and taxed at its normal Corporation Tax rate. Companies do not get the annual exempt amount that individuals have.
Losses and reliefs
- A capital loss can only be set against chargeable gains, of the same period or carried forward. It cannot reduce trading profits.
- A gain on business premises or other qualifying assets can be deferred by reinvesting in new ones (rollover relief).
- A gain on selling a substantial shareholding in a trading company is often exempt.
Read more: Chargeable gains on the CT600.