A partnership sold an asset and reinvested in a depreciating asset. We are going to claim hold-over under S154 TCGA. What will happen when a partner reduces his share in the partnership's capital assets in future? Will he trigger CGT each time he reduces his share, or will no gain be triggered until he retires (or after 10 years elapse).
Say he has a 30% share now, so he is deemed to have 30% of the new depreciating asset. If he reduces his share to 20%, will he be deemed to have ceased to use 10% for the business and have to pay tax on 1/3 of the held-over gain?
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I see your point. You seem to have spotted a gap in the legislation.
S154 is clear that the gain comes back into charge when the claimant disposes of asset No.2. That's when he leaves the partnership. I disagree your interpretation of s21. There may be disposals when he reduces his profit share. But he hasn't, at that time, disposed of the asset.
Just a passing thought... have you considered ER, if the disposal is on leaving the partnership? Could it be a double whammy?