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1997/98 CGT Liability Due 31.1.99 Undeclared.

Can I Just Bury Undeclared CGT Liability Which is 20 Years Old on 31.1.2019 (i.e in 2 weeks time?)

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This Query follows on from the previous one. In actual fact, it looks like the undeclared CGT bill payable 31 January 1999 should have been around £450.

Lifetime settlement was created June 1997. It was created when a fairly substantial share portfolio plus freehold property were transferred into discretionary Settlement.

Having sifted through all the paperwork it appears that a faulty holdover election was made at outset. By the way, I spoke with HMRC several months ago about this client and holdover and HMRC said they destroyed all paper records about 4-6 years ago.

The holdover election back in 1998 refers to a "transfer of securities set out on the enclosed schedule". The enclosed schedule, however, lists A) some 25 PLC companies, and then to the foot of the schedule B) the freehold property. There was an assessable gain attached to the freehold property, and it looks as if there was an intention to hold over. However, freehold property is not "securites" and so the hold over election presumably cannot cover the freehold property.

No capital gains tax was paid back then, and the due and payable date would have been 31 January 1999. Now we are well past 20 years after 5 April 1998. So it is an out of time tax year, even for fraud purposes.

But the time of the debt (due by 31.1.99) will not be out of date until two weeks' time.

Can I just forget about the matter completely. Problem is there is a 2017/18 CGT event in connection with the freehold property and I will need to declare as CGT base cost in the CGT calculation either MV of the property as it went into the Settlement (i.e. no holdover) otherwise 31.3.82 MV plus indexation (i.e. holdover occurred).

Without any clues concerning valid holdover I think I must use as base cost the MV of the property as it went into Settlement in June 1998. But by putting this on a Tax Return I am formally acknowledging (only in my head) that an ancient CGT liability has not been declared.

 

Replies (9)

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By MJShone
17th Jan 2019 08:10

Report it then everything's straight though I think you'll find that the tax can't be assessed now.

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By Tim Vane
17th Jan 2019 08:21

Do you not have anything useful to do in January? Move on.

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By 356B
17th Jan 2019 11:43

Sometimes I lie awake at night worrying about the incorrect figure I put on a return in 1968...........but not very often.

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Replying to 356B:
By penelope pitstop
17th Jan 2019 19:14

I draw the line at midnight 31 March 1982.
Any errors before then have been erased from my mind :-)

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By Tax Dragon
17th Jan 2019 18:28

I would treat the gain as held over. That was the intention, the property was on the claim sent to HMRC, HMRC didn't say "aha!"

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Replying to Tax Dragon:
By penelope pitstop
17th Jan 2019 19:12

Thanks for that wise input. I will bear that in mind.

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Replying to penelope pitstop:
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By Tax Dragon
17th Jan 2019 19:38

To be clear, the "aha!" in question would relate to the tax return in which, presumably, the disposal was disclosed.

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Replying to Tax Dragon:
By penelope pitstop
17th Jan 2019 20:12

Crystal clear. I think someone at Inland Revenue did not latch on to the oversight 20 years ago. 1997/98 was year 2 of self assessment and many professionals were still struggling with the concept of not putting copious notes on the SA return and filling in the new SA dedicated forms of election rather than just sending in a holdover claim in letter form as they had done before.
It appears that the solicitor in his letter of holdover claim made the oversight in the wording of his claim letter. But papers are missing so no-one knows exactly what really happened back then.

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Replying to penelope pitstop:
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By Tax Dragon
17th Jan 2019 21:08

Flipping it round, I'd be uncomfortable claiming a higher base cost than the one obtained by accepting the claim was validly made. And there's no realistic chance of a 19 yo gain being taxed. So it's "fair" as well as pragmatic to take that approach.

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