Anybody know a lot about tax?
Was having a discussion earlier today about the rationale behind s 39(2) TCGA 1992, which was originally enacted as Sch 6 Para 3(2) Finance Act 1965, (the Act which introduced CGT). On the face of it, it seems quite harsh given that it disallows deducting revenue expenditure from gains when computing CGT, even if that revenue expenditure has not been deducted from Income Tax because the asset was not being used in any trade.
The best I could come up with was that it was intended to act as an incentive to property developers to rent out their properties rather than leaving them vacant. If they left them vacant they couldn't deduct the cost of repair or maintenance anywhere, but if they rented them out, they could deduct the cost of repair and maintenance under the Income Tax Acts (now ITTOIA 2005). And that might have been a genuine issue in 1965, since Rent Acts were still in force and so landlords might gain from leaving property vacant and accumulating capital gains rather than allowing in a tenant protected by Rent Acts.