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CGT Final period exemption

Has the CGT final period exemption been reduced to 9 months?

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The final period exemption for CGT was due to be reduced from 18 months to 9 months with effect from 6 April 2020.

Is anyone able to confirm that this change definitely took place as I cannot find conclusive evidence and am reading conflicting information from HMRC.

Many thanks.

Replies (11)

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By jonharris999
16th Jul 2020 17:11

I'm puzzled about this too. I don't follow why

https://www.gov.uk/government/publications/private-residence-relief-hs28...

hasn't been updated in line with the much-trailed announcements.

I'm not brilliant with the Legislation website, but I can't satisfy myself that the Act has been updated as it was supposed to be, either.

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Scooby
By gainsborough
16th Jul 2020 17:46

Yes, it has been reduced.

The 2020 helpsheet is for 19/20 returns, whereas the rules kick in 6th April 2020.

(EDIT - I think the difficulty in finding legislation is due the the fact the Finance Bill 2019-2021 hasn't had Royal Assent yet)

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Replying to gainsborough:
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By jonharris999
16th Jul 2020 18:23

One might have ASSumed that if the liability to pay was coming early, the updated guidance would come early too.... :::)))

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Replying to jonharris999:
Scooby
By gainsborough
16th Jul 2020 18:31

I know (the manuals have not been updated either)....and don't get me started on the retrospective nature of the rules effective date coming in before the Bill becomes an Act.

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Replying to gainsborough:
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By jonharris999
16th Jul 2020 19:03

Indeed.

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Replying to gainsborough:
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By Tax Dragon
17th Jul 2020 07:15

gainsborough wrote:

....and don't get me started on the retrospective nature of the rules....

Oh go on Scoobs, let it all (hang) out.

To get you going, I'll take an opposing view. Lots of, if not most, tax rules take effect from when they are announced or from a date given in the announcement. "Retrospective" means applying from a date before it is announced.

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Replying to Tax Dragon:
Scooby
By gainsborough
17th Jul 2020 08:30

:-)...well it is Friday.

I would normally agree with you Tax Dragon, if we didn't have a Government that changes it's mind after things are included in the draft legislation - 17% Corporate Tax Rate, off-payroll rules.

Call me an old-fashioned Scoob, but I'd like to be able to consult the legislation from the date that the rules come in or has at least been passed in the House of Lords, rather than rely on HMRC's (not always updated) guidance.

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Replying to gainsborough:
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By Tax Dragon
17th Jul 2020 09:58

Ah, so it's the slow passage of law through parliament that's your gripe, not that it's retrospective.

TBH the change from 18m to 9 seems a funny one to get hot under the scooby collar about. It's when there's a whole raft of new rules that change as they go through the legislative process but that are active before the law passes that you could be justified being barking mad.

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Replying to gainsborough:
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By richard thomas
17th Jul 2020 15:47

Well you can, by going to the Parliament website, where you will find, as I just did, that the Lords will pass the Bill today. Since the Lords cannot amend the Bill without creating a major constitutional crisis, the latest version of the Bill on the website, as introduced in the Lords, is the final text of the Act that will be given Royal Assent very shortly. Needless to say it still includes the reduction to 9 months.

HMRC will not amend their guidance where it is amendments to current law that are involved, as distinct from draft guidance on a new topic, until Royal Assent.

A more interesting question is this.

Suppose there is a disposal on 6 April 2020 with completion on 30 April, and there is a gain, but no chargeable gain arises only because there was a period of 12 months at the end of the period of ownership when the property was not the disponor’s PPR. Under the law as it stood on 30 May, no return or payment on account was due on that date under Part 1 Schedule 2 FA 2019, because the gain made was not a “residential property gain” (RPG). To be an RPG a gain must be a “chargeable gain” (paragraph 1 Schedule 1B TCGA 1992), and by s 223(1) TCGA this gain is not a chargeable gain, because of PRR.

Once Royal Assent to FA 2020 is given, the gain retrospectively (in the ordinary, not necessarily legal, sense) ceases to have the protection of s 223 and so is an RPG within Schedule 2.

Paragraph 14 Schedule 2 FA 2019 might be relevant:
“(1) If, in determining whether a disposal is one to which this Schedule applies—

(a) a question arises as to whether a provision of TCGA 1992 applies, and

(b) the determination of the question requires account to be taken of times after the completion of the disposal,

it is to be assumed that the provision does apply if, at the time of the completion of the disposal, it is reasonable to expect that it will apply.”

The latest that that question is relevant is 30 May because the disponor will have to decide whether to make a return on that day and pay CGT on account. The provision of TCGA that is relevant to that question is s 223(1), but in my view the determination as of 30 May 2020 of whether s 223(1) applies to the disposal does not require account to be taken of times after completion. That is because it is a backward looking provision and PPR does not depend on the length of any period subsequent to disposal.

In any case the rest of paragraph 2 makes it clear that sub-paragraph (1) is about claims etc. that might be made.

I can see nothing else in Schedule 2 that would cause a return to be made because a retrospective provision has made the gain a chargeable gain.

The analysis is somewhat different if the case had been that there was a chargeable gain on part of the disposal and a part that came within s 223(2) as a PPR but which relied on a 12 month period at the end. There an RPG did arise and a return and PoA are needed. But the PoA would be based only on the actual chargeable gain part of the gain. Is there a requirement to correct following Royal Assent? Paragraph 15 Schedule 2 seems relevant here. Arguably sub-paragraph (1)(a) might apply on the basis that on or after Royal Assent s 223(2) as amended by the 2020 Act applies. However paragraph 15(2) makes a return of a deemed additional disposal arising in that way voluntary.

I am of course open to correction by those who know more, including what if anything HMRC may have said about this position.

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Scooby
By gainsborough
17th Jul 2020 10:13

I blame lockdown - everything is making me grumpy at the moment (at least my new film is out though, that should cheer me up).

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Replying to gainsborough:
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By Tax Dragon
17th Jul 2020 14:23

Yeah but, no offence, I'd be suing your plastic surgeon.

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