Introduction Taxation of capital gains
44.Paragraph 10 provides relief from charges under the Taxation of Chargeable Gains Act 1992 (TCGA) in respect of the first transaction and any leaseback agreement between Q and P, provided that certain of the conditions in paragraph 5 are satisfied.
45.Paragraph 10(1) states that the paragraph applies if conditions A to C in paragraph 5 (see paragraphs 12 to 16 above) are all satisfied within 30 days of the effective date of the first transaction. This condition is the same as that in paragraph 6(1)(b) in respect of SDLT.
46.Paragraph 10(2) provides the relief in respect of the first transaction. The first transaction is not treated for the purposes of the TCGA as a disposal by P or an acquisition by Q. In general, tax is charged under TCGA only if chargeable gains arise on the disposal of assets, so the provision that there is no disposal prevents a charge from arising.
47.Paragraph 10(3) similarly provides that if condition C is satisfied by Q and P entering into a leaseback agreement, the granting of a lease or sub-lease in the leaseback agreement is not regarded for TCGA purposes as a disposal of an interest in the land by Q or an acquisition by P.
48.Paragraph 10(4) provides that sub-paragraphs (2) and (3) are subject to paragraph 11, which provides for withdrawal of the relief if any of conditions D to G are not met.
49.Paragraph 10(5) provides that, if the interest in land ceases to be the bond asset but is replaced by an interest in other land, paragraph 10 is subject to paragraph 18, and sub-paragraph (6) provides that paragraph 10 is also subject to paragraph 20 (see paragraphs 93 to 95 below).
50.Paragraph 11 effectively withdraws the special treatment provided by paragraph 10, if any of conditions D to G are not satisfied.
51.Paragraph 11(1) provides three circumstances in which the paragraph applies. These are that:
	Q transfers the interest in land back to P without conditions E and F having been met;
	the period specified in condition G (under paragraph 5(11)(b) this is currently 10 years, but can be changed by regulations) expires without both condition E and condition F being satisfied; or
	it becomes clear at any time that one or more of conditions E to G cannot or will not be satisfied.
52.Paragraph 11(2) provides for the paragraph to have effect in one other circumstance. This is that the interest in land that is the subject of the first transaction is an interest in land in the UK, but Q fails to provide evidence of a charge over the land as required by Condition D.
53.Paragraph 11(3) provides that where paragraph 11 has effect, the disregards for TCGA purposes of the first transaction and the grant of the lease or sub-lease do not apply. The effect of this is that these transactions can constitute disposals and acquisitions for TCGA purposes, so that chargeable gains or losses may arise. Any gains or losses are computed as they would be if the transactions had not been disregarded.
54.Paragraph 11(4) provides that any chargeable gains or losses that result from the application of sub-paragraph (3) do not arise for tax purposes at the time of the actual transactions (the first transaction, or the grant by Q to P of the lease or sub-lease). The exact time when they arise is determined by the conditions that result in the application of sub-paragraph (3):
	where sub-paragraph (3) applies because the interest in land is transferred from Q to P without one or both of conditions E or F being satisfied, the chargeable gain or loss arises immediately before the transfer of the interest from Q to P;
	where sub-paragraph (3) applies by virtue of either of the conditions in the second and third bullets of paragraph 51 of this note, the chargeable gain or loss arises at the time mentioned in the relevant condition; and
	where sub-paragraph (3) applies by virtue of the failure to provide evidence of a charge over land located in the UK, the chargeable gain or loss arises at the expiry of the time allowed under condition D.
55.Paragraph 12 provides relief from tax under TCGA in respect of the second transaction.
56.Paragraph 12(1) provides that the second transaction is not regarded for TCGA purposes as a disposal by Q and an acquisition by P if:
	conditions A to C and E to G are satisfied; and
	if the relevant land is in the UK, condition D is also met.