Rollover relief on exchanges of jointly owned land

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S248A TCGA extends rollover relief to swaps of jointly owned interests in land where five conditions are met. 

Condition D requires that, after the swaps, each participant becomes "the sole owner of part of the holding" or, where there's more than one holding, "the sole owner of one or more of the holdings". 

I've dealt with cases where 50% interests were swapped and the relief was relatively straightforward, but what happens in a case where there are two partnerships, each with the same three partners, but only two of them are involved in the land exchanges?  Partner A exchanges his interest in land used in Partnership 1 for Partner B's interest in land used in Partnership 2, but Partner C's interests in land in both partnerships remain unchanged.  Is Condition D satisfied?  Partner A will have a bigger joint holding of the Partnership 2 land and Partner B likewise in Partnership 1, but neither will be a "sole owner" because of Partner C's continuing interests.

As I read the legislation, I struggle to see how Condition D is met in that case, but I feel I must be missing something because I can't see why, in principle, rollover relief shouldn't apply to an exchange whereby a partner with two smaller joint holdings arranges to become a partner with one larger joint holding.

Grateful to be told what I've misinterpreted or overlooked!    

Replies (7)

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By Tax Dragon
20th Nov 2023 17:37

In Scotland a partnership has legal personality. Outside Scotland, I wonder whether partnerships with the same partners can be distinct.

That's as maybe. If it's land used in a trade, do you need any extension to s152? If you do need to rely on s248A, I think it doesn't apply, for the reason you already know.

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Replying to Tax Dragon:
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By dwgw
20th Nov 2023 18:19

Good point and many thanks for your reply. There's no specific trading requirement for s248A, just a condition that the land mustn't be "excluded" (which, by s248C is an exempt main residence).

Now I think of it, my previous cases that seemed more straightforward involved farmhouses, which s248C might exclude but which perhaps qualified for relief under s248E (or the concession that preceded it - it was some years ago).

I think my blind spot was s152 itself! Ah well, it happens.

There are interests in farmhouses being exchanged in this case and the third partner has, and intends to retain, an interest in each. I think s248E relief would therefore not be available here because the fifth condition, that an immediate disposal of each property would be a wholly exempt main residence disposal, wouldn't be met.

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Replying to dwgw:
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By Tax Dragon
20th Nov 2023 21:29

If you act for farmers, you are surely well aware of s9 ITTOIA 2005.

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Replying to Tax Dragon:
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By dwgw
22nd Nov 2023 15:51

Yes, I am. It's a bit more complicated but I was trying to simplify it to highlight my essential point - sorry if anything was misleading.

Many thanks to you and the other contributors.

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By FrankTax
21st Nov 2023 07:45

" two partnerships, each with the same three partners" - that sounds like one partnership to me

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Replying to FrankTax:
paddle steamer
By DJKL
21st Nov 2023 09:35

Not sure- at one time we had one main long term partnership with A & B as partners and another one that we only formed for a large scale development with A & B as partners, certainly HMRC registered second/gave it a UTR and dealt with it as a cessation when done:- appreciate of course it could have been second activity for the first partnership.

Bank recognised new partnership as distinct re opening accounts, lenders recognised it as distinct which was helpful as we borrowed a fair bit from a bank that did not act for the original partnership and having borrowings and trading stock in same accounts might have been awkward. I prepared accounts for both.

I do appreciate we are in Scotland.

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By Tax Dragon
21st Nov 2023 09:48

For the uninitiated, Scotland gets a special mention in s4 PA 1890.

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