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CGT exchange and completion dates far apart

Is there an anti-avoidance time limit? Also different

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We have a client looking to sell a mixed commercial and residential property to a relative.

There are so many things to think about with this transaction but these are the headlines which are causing me concern

  • date of exchange is set to be pre 3/3 for obvious reasons
  • The purchaser (who is also a client) is needing to sell 3 properties in order to complete the deal. So the completion date is currently unkown. From a legal viewpoint this appears to be fine.

Q1, are there any anti-avoidance measures which would stop the tax rate being locked in on the sale of exchange should completion take an inordinate amount of time? Therefore making tax rates at point of completion relevant?

  • the property is mixed residential/commercial. So there are different CGT payment timing rules for each.

Q2, if (for arguments sake) the completion was delayed for 12 months. Would we then be in the situation that the gain attributable for the commercial side would need to paid under the "old" timing rules and therefore 31/1/22 and the tax due on the gain of residential not due until 30 days after completion? So potentially the CGT due on the commercial element due before any cash had changed hands (due to exchange being prior to 5/4/21)

I feel like my answer to Q2 is corret but could do with a steer on both parts.

TIA

 

Replies (6)

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Psycho
By Wilson Philips
23rd Feb 2021 20:25

I think that 2/3/21 might have been a safer date. EDIT - sorry, didn’t see the “pre” first time round.

I’m not aware of any particular anti-avoidance that would apply in the circumstances that you describe. However, it is not beyond the realms of possibility that if there are CGT hikes effective from Budget Day then anti-forestalling measures might be introduced, eg setting the tax point date as date of completion for any contracts entered into, but not completed, before 3 March.

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By Justin Bryant
24th Feb 2021 09:01

It is usual to have a long stop completion date in the contract to avoid the risk of it being void for uncertainty etc. - do a Google search re that. Otherwise, you have nothing to lose, as it can always be rescinded after the 2021 Budget without any tax consequences.

The 2020 Budget ER anti-forestalling rules effectively confirmed in the absence of those rules this planning works.

Indeed, to avoid that potential problem no doubt some people complete on the basis the paperwork can simply be chucked in the bin later if necessary (de facto rescission if you like), but that's very naughty.

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Replying to Justin Bryant:
Psycho
By Wilson Philips
24th Feb 2021 10:07

Justin Bryant wrote:
you have nothing to lose, as it can always be rescinded after the 2021 Budget without any tax consequences.

I wouldn't be so quick to say nothing to lose - there may well be non-tax consequences.

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Replying to Wilson Philips:
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By Justin Bryant
24th Feb 2021 10:21

Like what exactly?

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Replying to Justin Bryant:
Psycho
By Wilson Philips
24th Feb 2021 10:50

It doesn't surprise me that you don't know.

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Replying to Wilson Philips:
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By Justin Bryant
24th Feb 2021 10:57

Now there's a surprise (not)!

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