Taper Relief on Sale of Mixed Use Assets

Taper Relief on Sale of Mixed Use Assets

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I have 2 aspect enquiries on at present where the HMIT are telling me that their interpretation of para 9 Sch 1 TCGA92 applies. One case relates to an ex-retirement home, the other to a guest house.

I am most annoyed by this stupid interpretion. In my view, there are 2 types of assets (with one sub-divided into 2), i.e business assets and non business assets (sub-divided into Principal Private Residence and other (taxable) assets)). Once one has deducted the PPR Relief proportion then, logically (assuming no other element of "non-business" asset), one can only have a "business" asset left (attracting 75% taper). It is totally illogical to apply the PPR proportion again to the remaining gain after PPRR has already been deducted and then treat the answer as a non-business asset attracting non-business taper relief with the other proportion attracting business taper relief. There were only 2 uses of the asset - a business and a PPR. Once one has taken away the PPR then one is only left with the business. There was never a "non-business" asset

Whilst all the books, course notes, etc. seem to say that HMIT's interpretation is unfair and anomolous, has anyone challenged this view through the Commissioners? I am fighting my corner for my clients but wonder if there is any further ammunition I could use besides logic.

If I went to the Commissioners, would I stand any chance of success? Should my clients write to their MPs?

TwoSues

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By AnonymousUser
02nd Aug 2006 15:48

I don't know about ....
... any commissioners' cases in the pipeline, but I do recall that Gerry Hart had an argument which he though might be worth a stab, but for the life of me I can't remember what it was. It was something to do with apportionments needing to be just and reasonable elswhere in TCGA 1992. At the time I didn't give it much thought because personally I think para 9 is quite clear, whether intended to have the effect it does or not.

The suggestion was reported in the ICEAW Taxline bulletin about 18 months, maybe two years ago so if you have access you should be able to find or obtain from the institute library. Or you could just ring Gerry Hart & ask him what the point was and whether he has had any success with it.

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By AnonymousUser
01st Aug 2006 21:51

Somewhat confused by the question
But the fact is that interaction of PPR and taper relief rules gives anomalous results. The problem is that the two sets of rules are mutually exclusive. Bear in mind that PPR relief does not exempt a property or part of a property - it exempts a gain or part of a gain. A subtle difference, but an important one. Likewise, you do not attribute business and non-business taper to different parts of the asset - you apply the respective taper rates to different parts of the gain. It doesn't make sense but I don't think you would stand much chance in front of the Commissioners. Best bet would be a Hansard approach, given that that provides a solution where the legislation provides unexpected and anomalous results but I would have though that would have been tried by now given that this problem has been so well-known for so long.

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