{
  "url": "https://openlegislation.uk/taxation-of-chargeable-gains-act-1992/schedule-5/paragraph-1",
  "json_url": "https://openlegislation.uk/taxation-of-chargeable-gains-act-1992/schedule-5/paragraph-1.json",
  "legislation": "ukpga/1992/12",
  "legislation_title": "Taxation of Chargeable Gains Act 1992",
  "legislation_url": "https://openlegislation.uk/taxation-of-chargeable-gains-act-1992",
  "path": "schedule/5/paragraph/1",
  "kind": "paragraph",
  "number": "1",
  "heading": null,
  "text": "(1) In construing section 86(1)(e) as regards a particular year of assessment, the effect of section 1K shall be ignored.\n(2) In construing section 86(1)(e) as regards a particular year of assessment—\n(a) any deductions provided for by section 1(3) shall be made in respect of disposals of any of the settled property originating from the settlor, and\n(b) section 16(3) shall be assumed not to prevent losses accruing to trustees in one year of assessment from being allowed as a deduction from chargeable gains accruing in a later year of assessment (so far as not previously set against gains).\n(3) In a case where—\n(a) the trustees are participators in a company in respect of property which originates from the settlor, and\n(b) under section 3 gains or losses would be treated as accruing to the trustees in a particular year of assessment by virtue of so much of their interest as participators as arises from that property if the assumption as to residence specified in section 86(3) were made,\nthe gains or losses shall be taken into account in construing section 86(1)(e) as regards that year as if they had accrued by virtue of disposals of settled property originating from the settlor.\nSection 3B(1) to (3) shall apply for the purposes of this sub-paragraph as they apply for the purposes of section 3.\n(4) Where, as regards a particular year of assessment, there would be an amount under section 86(1)(e) (apart from this sub-paragraph) and the trustees fall within section 86(2)(b), the following rules shall apply—\n(a) assume that the references in section 86(1)(e) and sub-paragraphs (2)(a) and (3) above to settled property originating from the settlor were to such of it as constitutes protected assets;\n(b) assume that the reference in sub-paragraph (3)(a) above to shares originating from the settlor were to such of them as constitute protected assets;\n(c) find the amount (if any) which would be arrived at under section 86(1)(e) on those assumptions;\n(d) if no amount is so found there shall be deemed to be no amount for the purposes of section 86(1)(e);\n(e) if an amount is found under paragraph (c) above it must be compared with the amount arrived at under section 86(1)(e) apart from this sub-paragraph. and the smaller of the 2 shall be taken to be the amount arrived at under section 86(1)(e).\n(5) Sub-paragraphs (2) to (4) above shall have effect subject to sub-paragraphs (6) and (7) below.\n(6) The following rules shall apply in construing section 86(1)(e) as regards a particular year of assessment (“the year concerned”) in a case where the trustees fall within section 86(2)(a)—\n(a) if the conditions mentioned in section 86(1) are not fulfilled as regards the settlement in any year of assessment falling before the year concerned, no deductions shall be made in respect of losses accruing before the year concerned;\n(b) if the conditions mentioned in section 86(1) are fulfilled as regards the settlement in any year or years of assessment falling before the year concerned, no deductions shall be made in respect of losses accruing before that year (or the first of those years) so falling,\nbut nothing in the preceding provisions of this sub-paragraph shall prevent deductions being made in respect of losses accruing in a year of assessment in which the conditions mentioned in section 86(1)(a) to (d) and (f) are fulfilled as regards the settlement.\n(6A) In construing section 86(1)(e) as regards a particular year of assessment, if—\n(a) section 86 did not apply to the settlement in a year of assessment ending before 6 April 2025 (“the earlier year”), but\n(b) that section would have applied to the settlement in the earlier year if the condition in section 86(1)(e) (settlor domiciled in the United Kingdom) had been met in the earlier year,\ndeductions shall be made in respect of losses accruing in the earlier year, but only so far as those losses have not been taken into account for the purposes of section 87 in determining the section 1(3) amount for the settlement for the earlier year.\n(7) In construing section 86(1)(e) as regards a particular year of assessment and in relation to a settlement created before 19th March 1991, no account shall be taken of disposals made before 19th March 1991 (whether for the purpose of arriving at gains or for the purpose of arriving at losses).\n(8) For the purposes of sub-paragraph (4) above assets are protected assets if—\n(a) they are of a description specified in the arrangements mentioned in section 86(2)(b), and\n(b) were the trustees to dispose of them at any relevant time, the trustees would fall to be regarded for the purposes of the arrangements as not liable in the United Kingdom to tax on gains accruing to them on the disposal.\n(9) For the purposes of sub-paragraph (8) above—\n(a) the assumption as to residence specified in section 86(3) shall be ignored;\n(b) a relevant time is any time, in the year of assessment concerned, when the trustees fall to be regarded for the purposes of the arrangements as resident in a territory outside the United Kingdom;\n(c) if different assets are identified by reference to different relevant times, all of them are protected assets.",
  "extent": "E+W+S+N.I.",
  "status": null,
  "version": "current",
  "annotations": [
    {
      "type": "F",
      "label": "F1",
      "text": "Words in Sch. 5 para. 1(1) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 90(2)"
    },
    {
      "type": "F",
      "label": "F2",
      "text": "Words in Sch. 5 para. 1(2)(a) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 90(3)"
    },
    {
      "type": "F",
      "label": "F3",
      "text": "Words in Sch. 5 para. 1(3)(a) substituted (with application in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(10)(a)"
    },
    {
      "type": "F",
      "label": "F4",
      "text": "Words in Sch. 5 para. 1(3)(b) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 90(4)(a)"
    },
    {
      "type": "F",
      "label": "F5",
      "text": "Words in Sch. 5 para. 1(3)(b) substituted (with application in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(10)(b)"
    },
    {
      "type": "F",
      "label": "F6",
      "text": "Words in Sch. 5 para. 1(3) added (with application in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(10)(c)"
    },
    {
      "type": "F",
      "label": "F7",
      "text": "Words in Sch. 5 para. 1(3) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 90(4)(b)(i)"
    },
    {
      "type": "F",
      "label": "F8",
      "text": "Words in Sch. 5 para. 1(3) substituted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 90(4)(b)(ii)"
    },
    {
      "type": "F",
      "label": "F9",
      "text": "Sch. 5 para. 1(6A) inserted (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), Sch. 12 paras. 69(2), 70(1)"
    }
  ],
  "outstanding_effects": [],
  "provenance": {
    "source": "legislation.gov.uk",
    "source_url": "https://www.legislation.gov.uk/ukpga/1992/12/schedule/5/paragraph/1",
    "retrieved_at": "2026-11-14T03:34:05.925206+00:00"
  },
  "licence": "Open Government Licence v3.0",
  "licence_url": "https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/",
  "attribution": "Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives."
}