Hi All
I think its a pretty simple answer and I think a potential client may have been given some poor advice on this...
From what I recall, BTL properties owned by individuals aren't eligible for CGT relief - holdover/rollover as they are not classed as business assets.
In addition its not acceptable to part dispose of property over a number of years as the transaction will be treated as a series/connected event.
They have been advised to go down the above routes which on the face of it I disagreed with...and I don't think I have missed any significant changes...
If anyone has any comments or useful links of references, I'd be grateful...
Thanks
Smithie
Replies (6)
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No holdover/rollover.
I suspect that you are right about the series of disposals (or maybe not) but, from a practical/legal perspective, I can't see how it would be possible in any event. Who (unconnected) would buy a part interest in a residential property?
Is it a business?
If you can demonstrate that the property rental is a business rather than investment activity, you can claim Rollover Relief, ie incorporation relief under s162 TCGA 1992. This would however require you to show that the property letting was being run as a business, the main test being at least 20 hours a week being spent on managing the properties.
Not sure about the split transactions as you've not stated enough background detail to know what is being proposed.
SDLT is also a factor to consider.
My ignorance
If you can demonstrate that the property rental is a business rather than investment activity, you can claim Rollover Relief, ie incorporation relief under s162 TCGA 1992. This would however require you to show that the property letting was being run as a business, the main test being at least 20 hours a week being spent on managing the properties.
I was displaying my ignorance. This is interesting:
There is no
Main test being at least 20 hours a week being spent on managing the properties - although I am happy to be proved wrong if you can cite some case law saying that that is the case. Per Ramsay, the "business" test is similar to that for VAT, so arguably no hours are fine if you employ an agent to manage the properties (it would be potentially discriminatory against disabled people otherwise, who can not physically (or mentally) deal with such things).
Possibly seems the answer
I agree with earlier posts that holdover can apply, but unless they are qualifying holiday lets you'll have a hard time persuading HMRC.
As for disposing of properties over a period of time; of course it can be done (I'm assuming connected party transfers, although if they can persuade a third party to buy in tranches more or to your client), but what will the tax treatment be?
It is unlikely that s.19, or 20 TCGA (series of transactions would have any effect on connected party transactions as full MV would apply (unless to a spouse) and in practice an unconnected party won't pay anything less than MV.