Taxes Consolidation Act 1997 section 539

Disposals in cases of hire purchase and similar transactions

Section 539 provides that hire-purchase transactions are treated as outright disposals for capital gains tax purposes, with provision for adjustment if ownership never passes to the hirer.

• A hire-purchase or similar transaction is treated as an outright disposal of the asset at the start of the hire period, for both the seller and the hirer.
• CGT rarely arises on hire-purchase transactions because the assets involved are usually exempt wasting assets or wasting assets that have qualified for capital allowances.
• If the hire terminates without ownership passing to the hirer (e.g. due to repossession), the CGT charge is adjusted by repayment or discharge on the basis that no disposal occurred.
• A claim for repayment arising from such an adjustment must be made within four years from the end of the chargeable period in which the termination occurs, notwithstanding the general time limit in section 865.