Tue 01 Apr 2014
The automatic exemption from capital gains tax for the final period of ownership of former principal private residences (PPRs) will be halved to 18 months from 6 April 2014. This change may affect people who still own a property which has previously been their main residence but which they ceased to occupy before 6 October 2012.
Contracts made before 6 April 2014 but not completed until afterwards will not be affected by the reduction
Until 5 April 2014 the final 36 months of ownership always qualify for relief provided that the property was the individual’s principal private residence at some point. In extreme cases this reduction may result in halving the amount of relief available.
This may not have a significant impact for many if the property is sold within a few months of the 18 month limit as the chargeable element of the gain may be covered by an individual’s annual CGT exemption (£11,000 for 2014/15 or £22,000 in the case of jointly owned homes).
Former homes that have subsequently been let can also qualify for additional “letting relief” in addition to PPR relief.
The Government has introduced provisions to keep the final 36 month exemption in place where someone is moving into a residential care home. This affects not only the elderly but also anyone who has to enter residential care for health reasons.
The Upper Tribunal (Lands Chamber) reviewed the basis of apportioning the sale price of land between CGT exempt and taxable parts. They decided HMRC’s approach was fundamentally flawed. Despite the taxpayers neither appearing nor being represented at the UT hearing, in Oates v HMRC the UT agreed with the taxpayers’ apportionment allocating a far higher […]
The automatic exemption from capital gains tax for the final period of ownership of former principal private residences will be halved to 18 months from 5 April 2014. Individuals who have already moved out of their former residence may now find that they have an unexpected tax liability. This change may affect people who own […]
The Government’s consultation about taxing non-residents on their gains derived from UK-residential property goes further than simply extending UK CGT to make non-residents taxable on disposals of UK residential property in the same way as UK residents. The new rules will only apply to gains arising after April 2015. What will be chargeable? The extended […]
When the Chancellor announced that the final part of a PPR’s ownership which would automatically qualify for CGT relief was to be reduced from 36 to 18 months he also proposed to include an anti-avoidance provision. To prevent owners setting up uncompleted contracts speculatively the original announcement (see HMRC explanatory note 14 February 2014) the […]
The multi-faceted case of Ritchie and Ritchie v HMRC doesn’t quite cover all the bases in principal private residence (PPR) relief but it does present an interesting and wide-ranging case study as it involved: • land purchased but not immediately developed to include a dwelling; • acquisition of the land in two tranches; • consideration of the permitted […]
Occasionally a Tax Case is published and, even at its first reading, the heart of the experienced tax investigations practitioner sinks as he realises that the case is likely to be misquoted by HMRC as supporting such-and-such a principle. For instance, the recent case of Daniel Pittack v HMRC ([2014] UKFTT 670) which was heard […]
The Office of Tax Simplification (‘OTS’) has published the first stage of its highly anticipated review of Capital Gains Tax (‘CGT’)...
The Budget introduces changes to Capital Gains Tax: entrepreneurs’ relief that will affect individuals who wish to benefit from entrepreneurs’ relief (ER) on capital gains tax (CGT) without holding at least a 5% stake directly in a company carrying on a trade. This new measure will deny ER on a disposal of shares in a […]
The changes to the taxation of dividends from 6 April 2016 will see the differential between the rate of income tax on a distribution (up to 38.1%) and that of capital gains tax (as low as 10%, where entrepreneurs’ relief is available) at its greatest in recent years. In anticipation of this, a number of […]
The payment window for capital gains tax (CGT) due on the disposal of residential properties will be reduced dramatically from April 2019, but little is known as to how this will work. The Chancellor has announced that from April 2019, the CGT due on the disposal of residential property must be paid within 30 days […]
Will the Autumn Statement change entrepreneurs’ relief? There is widespread speculation about the possibility of the Chancellor making further changes (restrictions) to entrepreneurs’ relief (ER) when he makes his Autumn Statement next Wednesday, 25 November. His previous reforms have not all gone down well because they hit not only their intended targets of those abusing […]
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The Budget introduces changes to Capital Gains Tax entrepreneurs’ relief that will affect individuals and members of partnerships who sell personal assets used in a business but do not, at the same time, dispose of a significant holding of shares in the company carrying on the business or of a significant share in the assets […]
A tax change that the Chancellor didn’t mention in the House of Commons today will increase tax on shareholders of quoted companies that make a return of capital or pay a special dividend. These groups often give shareholders the choice of receiving the cash in income or capital form. Many shareholders don’t use their annual […]
Whilst taper relief (TR) is long gone its effects still surface occasionally, so it is worth noting the Case of Stolkin v HMRC ([2016] EWCA Civ 447) which concerned the order in which reliefs are applied. Stolkin is only relevant to cases involving the interaction of TR with other reliefs because of perceived ambiguities in […]
The First Tier Tribunal (FTT) in Nicholas Trigg v HMRC found in favour of an appellant who held ‘future proofed’ bonds that would convert to euros if the UK adopted the euro. Trigg bought the bonds second-hand at a price he believed to be low. He believed they were qualifying corporate bonds (QCBs) so his […]
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Background In March 2014, HMRC issued a consultation document about implementing a capital gains tax charge on non-residents. Historically, non-residents, whether they be individuals, companies or trusts, have not been liable to CGT on gains on residential properties. However, in April 2013 the Annual Tax on Enveloped Dwellings (ATED) was introduced, and with it ATED-related […]
In the First Tier Tribunal (FTT) case of Rice v HMRC a car trader successfully appealed against HMRC’s refusal of entrepreneurs’ relief (ER) on the sale of his business premises. Mr. Rice had traded for years from a showroom and site selling high performance cars. His site was in town and depended on passers-by being […]
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HMRC have announced their view that a scheme that its promoters claim converts earnings of the owner/managers of trading companies, in particular personal service companies (PSCs) from income to chargeable gains which attract only the 10% entrepreneurs’ relief rate of CGT is “highly contrived” and ineffective. The scheme seems to be based on the premise […]
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From 6 April 2020, UK taxpayers who dispose of residential property, will be required to report the disposal and pay the relevant Capital Gains Tax (“CGT”) liability within 30 days from completion. How are residential property disposals reported currently? At the moment, UK taxpayers report any disposal on their Self-Assessment tax return and pay any […]
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There is an old and bad joke that says that the difference between HMRC and a rabid Pit Bull terrier is that, if you batter a rabid Pit Bull Terrier long enough, it might eventually let go, whereas HMRC… But now and then, and against all odds, after successive and repeated batterings by the Courts, […]
The recent case of Julian Blackwell v HMRC considered whether the cost of getting out of an agreement could be treated as enhancement expenditure for capital gains purposes. Mr Blackwell’s holding of “A” shares in the eponymous publishing company (“BPH”) was sufficient to block a special resolution. Thus his approval was required for any sale […]
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