Capital gain on FHL with rollover relief

GCT and rollover relief

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My client has rollover relief, 1996,on a FHL (deemed purchase £2K, value now £850K) but the property no longer meets the rules to qualify as a FHL. If he makes a PPR election I assume he will loose his entrepreneurs relief. What is the CGT position or can you point me in the right direction.

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By michaelblake
13th Jul 2016 14:26

Can you be more precise. ER is only due where there is a gain, and a gain arises where there is a disposal or a deemed disposal. There is no bar to claiming both PPR and ER if there is a disposal and the qualifying conditions for both reliefs are met. If however you mean that the owner is going to occupy the property as his main residence there would be no disposal and therefore no gain to which ER could apply.

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By michaelblake
13th Jul 2016 14:28

Can you be more precise. ER is only due where there is a gain, and a gain arises where there is a disposal or a deemed disposal. There is no bar to claiming both PPR and ER if there is a disposal and the qualifying conditions for both reliefs are met. If however you mean that the owner is going to occupy the property as his main residence there would be no disposal and therefore no gain to which ER could apply.

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Replying to michaelblake:
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By gcg007
13th Jul 2016 15:18

Thanks for the reply Michael. The FHL property qualifies for ER but the property does not now meet the rules of FHL. He wishes to obtain valuations for the property now and pay the CGT at the ER rate.... is this possible?

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Replying to gcg007:
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By michaelblake
13th Jul 2016 15:35

No. There has to be a CGT disposal that gives rise to a gain and the cessation of the FHL trade does not trigger a disposal or deemed disposal.

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Replying to michaelblake:
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By gcg007
13th Jul 2016 17:05

Thanks again Michael. I already have agreement to this proposal from HMRC - I suggested 2 valuations from local agents and they said the district valuer may be involved... I just wanted someone to confirm that the ER rate would apply on the 'paper gain'. I do not want my client to loose the ER on the gain.

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By SteveHa
13th Jul 2016 15:23

So he wants to pay CGT on a gain that doesn't exist? I dare say HMRC will be happy enough, but it won't mitigate CGT on the eventual disposal.

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