Money for old rope - Taxable?

Money for old rope - Taxable?

Didn't find your answer?

Our good friend Dave has lived in a rented property for long enough for him to have certain rights as a sitting tenant . The owner of the place has now given him £23K in order to slink his hook. Nice money if you can get it.....

Instinctively this shouldn't be chargeable to CGT, but I haven't been able to pin down on what grounds that would be so. It's not a payment to surrender a lease, just the sale of the right to remain. Does PPR relief apply even though Dave doesn't own the place? That would at least distinguish it from the sale of, say, fishing rights. Or can the rent payments made be seen as a base cost since they were necessary to maintain the rights that have now been sold?
Geoff Challinger

Replies (6)

Please login or register to join the discussion.

avatar
By User deleted
29th Dec 2006 15:47

Quick end of year opinion
is that as a disposal of an asset (the right to remain) for consideration this is subject to CGT.

PPR is not strictly available as it is not an interest in the property that is being sold here, but a right under some statute and PPR cannot apply on a disposal of an asset separate from the property.

There might be a concession here as there is with other similar situations where PPR is not strictly available.

Thanks (0)
avatar
By User deleted
31st Dec 2006 12:54

I am not sure Robert Rabbit is right.
In Tax Bulletin 13, dealing with the possibilty of making s.222(5) elections where a tenancy is involved, the Revenue commented:-

"Where an individual's main residence is a residence occupied under licence, in which no legal or equitable interest is held, relief will still be available on one other residence which is owned even though an election cannot be made. This is because the owned residence will be the only residence in which that individual has a legal or equitable interest. An election will still be appropriate whenever an individual owns more than one residence each of which consists of a dwelling-house or an interest in a dwelling-house."

On that basis you have to ask if Dave was a mere licencee, or had tenancy rights. if the latter, he will enjpoy PPR relief on the money he has been paid to give up those rights

Thanks (0)
avatar
By User deleted
01st Jan 2007 10:58

He should have rights
I concur that the receipt will be a CGT matter, attracting PPR, if the tenant had acquired what I might term an implied tenancy or lease. Reading the history of the occupation of the premises, I believe such a right or interest now exists and you might be able to get a kindly officer of the Valuation Agency to confirm the law here.

Thanks (0)
avatar
By AnonymousUser
02nd Jan 2007 14:15

Similar case, no CGT

I worked a similar case a few years back, for someone giving up the right to live, in retirement, in a tied farm cottage.

Initially HMRC said the receipt was taxable.

I pointed them at statute, which says, paraphrasing, "This section applies to any Capital Gain from the sale of a main residence, or an interest in a property which is a main residence".

The inspector sought head office advice, and then backed off.

So, so long as you have a legal right to occupy, and that right is being surrendered, then you have a capital gain covered by PPR.

If you get stuck, let me know and I will see if I can look out the correspondence for you and anonymise it.

 

Thanks (0)
avatar
By geoffemtacs
02nd Jan 2007 20:11

Ta
Thanks guys. Reassuring to find that (a) my instincts remain good, (b) Dave gets to keep all his £23K which has disappeared into house deposit anyway and (c) it wasn't a dumb-[***] easy question.

Thanks (0)
avatar
By AnonymousUser
03rd Jan 2007 13:31

It...

... may be worth asking if there is any asset here at all - ie are the statutory rights the tenant apparently has assets for CGT?

If not, there cannot be a CGT charge at all.

Thanks (0)