Capital Gains Tax

Tax rates and allowances

The government has previously announced that the CGT annual exempt amount will reduce from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.

For a table of the main tax rates and allowances for 2023/2024, click here.

Disposals of joint interests in land

Current provisions in the Taxation of Chargeable Gains Act 1992 allow individuals and partners in certain partnerships holding land, where roll-over relief or principal private residence relief would be available on a disposal of that land, to qualify for that relief where the disposal involves an exchange of land held by the individual co-owners in consideration of land provided by other co-owners – broadly the provisions allow individuals to reorganise their holdings in, for example farmland by exchanging land interests and claiming tax relief to the extent the other conditions for relief are met.

The relief will be extended for disposals on or after 6 April 2023, to ensure roll-over relief and principal private residence relief will be available for LLPs and Scottish partnerships when an exchange of interest in land or private residences held by an LLP or partnership takes place as the case currently is when the land is held by individual members or partners in other types of partnerships. .

Capital gains avoidance: share exchanges

The government has confirmed that it intends to introduce an anti-avoidance provision in relation to securities in a UK close company which are exchanged for securities in a non-UK company which would be close if it were UK resident. The provision will deem securities in the non-UK company to have a UK situs for capital gains tax purposes.

The legislation gives individuals the option to elect out of its provisions by choosing to pay a CGT charge based on the market value of the securities in the UK company at the point of the reorganisation. Individuals must make the election before the first anniversary of 31st January following the tax year in which the reorganisation takes place.

An equivalent provision will be introduced for income tax purposes, such that dividends and other distributions received in respect of the non-UK securities will not be considered relevant foreign income.

The rules will have effect where an individual has a material interest in both the UK and the non-UK company and where the share exchange is carried out on or after 17 November 2022. Draft legislation was originally published alongside the Autumn Statement 2022.

Late completion of unconditional contracts

New provisions will be introduced that will modify the relevant notification periods and assessment and claim time limits, so that these will all operate by reference to the tax year or accounting period when an asset is conveyed or transferred rather than the tax year or period in which the contract for the disposal was made.

The modifications will apply for CGT purposes where the conveyance or transfer of an asset takes place after the date six months after the end of the tax year in which the disposal is treated as taking place and for corporation tax, the date one year after the end of the accounting period for the disposal.

The proposed amendments appear to be driven by the fact that, although section 28 TCGA treats the point of disposal of an asset as being the time when an unconditional contract comes into effect, section 28 TCGA only comes into operation if the contract is completed, or in other words, if the disposal actually takes place. Section 28 TCGA does not deem a disposal to take place. When a disposal has in fact taken place in accordance with the contract, section 28 TCGA fixes the date of that disposal as the date of the unconditional contract.

Under the current rules, a delayed completion can therefore leave HMRC out of time to assess tax in the year the unconditional contract was entered into, hence the proposed delayed reporting and assessment times.