Chargeable Gains for Companies

Key facts

Companies pay Corporation Tax on chargeable gains — not Capital Gains Tax (CGT).
There is no annual exempt amount for companies; every pound of gain is taxable.
Indexation allowance is frozen at December 2017 — no further inflation relief is given after that date.
Business Asset Disposal Relief (BADR) is not available to companies — it is only for individuals.
The Substantial Shareholding Exemption (SSE) can exempt gains on disposal of subsidiary shares.

How Companies Are Taxed on Capital Gains

When a company disposes of a capital asset — such as property, shares, goodwill, or equipment — any profit is a chargeable gain. Unlike individuals, companies do not pay Capital Gains Tax (CGT). Instead, chargeable gains are added to the company’s total profits and taxed at the normal Corporation Tax rate.^[1]

Key differences from the individual CGT regime:

No annual exempt amount — individuals get a CGT-free allowance (currently £3,000); companies get nothing
No Business Asset Disposal Relief (BADR) — the 18% rate available to qualifying individuals does not apply to companies
No Investors’ Relief — again, individuals only
Gains are simply added to other profits and taxed at the company’s effective CT rate (19%–25%)

Calculating a Chargeable Gain

The basic computation is:^[2]

Step	Detail
1. Disposal proceeds	The amount received (or market value if not an arm’s length transaction)
2. Less: allowable costs	Original cost + incidental costs of acquisition + enhancement expenditure + incidental costs of disposal
3. Less: indexation allowance	Inflation relief based on the RPI increase from acquisition to December 2017 (see below)
4. = Chargeable gain	Added to the company’s total profits for CT purposes

If the result is negative, the company has a capital loss. Capital losses can only be set against chargeable gains — they cannot be set against trading profits or other income.

Indexation Allowance

Indexation allowance increases the cost of an asset by reference to the Retail Prices Index (RPI), removing the inflationary element of a gain. However, since 1 January 2018, the indexation allowance has been frozen:^[2]

For assets acquired before January 2018, indexation is calculated from the month of acquisition to December 2017
For assets acquired from January 2018 onwards, no indexation allowance is available at all
Indexation can reduce a gain to zero but cannot create or increase a loss

Example: A company bought a commercial property in March 2010 for £200,000 and sells it in 2026 for £400,000. The RPI factor from March 2010 to December 2017 is approximately 0.217. Indexation allowance = £200,000 × 0.217 = £43,400. Chargeable gain = £400,000 − £200,000 − £43,400 = £156,600.

Key Reliefs for Company Gains

Several reliefs can reduce or eliminate chargeable gains for companies:

Substantial Shareholding Exemption (SSE)

The SSE exempts gains (and losses) on the disposal of shares in a subsidiary where:^[3]

The disposing company has held at least a 10% shareholding for a continuous 12-month period in the two years before disposal
The subsidiary is a trading company (or a member of a trading group)
The disposing company is also a trading company or member of a trading group

When SSE applies, the entire gain is exempt from Corporation Tax. This is one of the most valuable reliefs for groups disposing of subsidiaries.

Rollover Relief

Rollover relief allows a company to defer a chargeable gain when it sells a qualifying business asset and reinvests the proceeds in another qualifying asset within one year before or three years after the disposal.^[4]

Qualifying assets include:

Land and buildings used in the trade
Fixed plant and machinery
Ships, aircraft, and hovercraft
Goodwill (for disposals before July 2015)

The gain is “rolled over” into the base cost of the new asset, reducing the cost for future gain calculations.

Other Reliefs

Holdover relief on gifts: Not generally available to companies (it is an individual relief)
Intra-group transfers: Assets transferred between companies in the same 75% group take place at no gain / no loss
Disincorporation relief: Expired on 31 March 2018 — no longer available

Reporting Gains on the CT600

Chargeable gains are reported on the CT600 Company Tax Return. The gain is calculated on a separate computation and the net figure (after losses and reliefs) is entered in Box 16 of the CT600. Supporting computations should be included with the return.^[5] You can file the CT600 online with HMRC-recognised software.

Capital losses: If your company has capital losses that exceed gains in a period, the excess is carried forward indefinitely to set against future chargeable gains. Capital losses cannot be carried back (except on cessation of trade).

Frequently Asked Questions

Do companies pay Capital Gains Tax?

No. Companies pay Corporation Tax on chargeable gains, not Capital Gains Tax. Gains are added to the company’s total profits and taxed at the normal CT rate of 19%–25%.

Do companies get an annual exempt amount for capital gains?

No. Unlike individuals, companies do not receive an annual exempt amount. Every pound of chargeable gain is subject to Corporation Tax.

What is the indexation allowance for companies?

Indexation allowance adjusts the base cost of an asset for inflation using the RPI. However, it has been frozen at December 2017 — no further inflation relief is given for any period after that date.

Can a company carry forward capital losses?

Yes. Capital losses that exceed gains in a period are carried forward indefinitely to set against future chargeable gains. However, capital losses cannot be set against trading profits or other income.

What is the Substantial Shareholding Exemption?

The SSE exempts gains on the disposal of shares in a subsidiary where the disposing company held at least a 10% shareholding for 12 continuous months in the previous two years, and both companies are trading companies.

Sources

Company Taxation Manual: CTM01000 – Corporation Tax: basics — HMRC
Capital Gains Manual: CG40000 – Companies — HMRC
Substantial Shareholding Exemption — HMRC
Rollover relief — GOV.UK
Corporation Tax: selling or disposing of assets — GOV.UK