Proyecto La Ligua

This paragraph applies where the value of goodwill which a partnership generates in the conduct of its business is not recognised in its balance sheet and where, as a matter of consistent practice, no value is placed on that goodwill in dealings between the partners. In such circumstances, the partnership goodwill will not be regarded as a ‘fungible asset’ (and, therefore, will not be within the definition of ‘securities’ in section TCGA92/S104 (3) for the purpose of Capital Gains Tax taper relief under TCGA92/S2A. Accordingly, on a disposal for actual consideration of any particular partner’s interest in the goodwill of such a partnership, that interest will be treated as the same asset (or, in the case of a part disposal, a part of the same asset) as was originally acquired by that partner when first becoming entitled to a share in the goodwill of that partnership.

The treatment described in the preceding paragraph will also be applied to goodwill acquired for consideration by a partnership but which is not, at any time, recognised in the partnership balance sheet at a value exceeding its cost of acquisition nor otherwise taken into account in dealings between partners. However, such purchased goodwill will continue to be treated for the purpose of computing capital gains tax taper relief as assets separate from the partnership’s self-generated goodwill. On a disposal or part disposal for actual consideration of an interest in such purchased goodwill by any particular partner, that interest shall be treated for taper relief purposes as acquired either on the date of purchase by the partnership or on the date on which the disposing partner first became entitled to a share in that goodwill, whichever is the later.

D13. Asset of negligible value: Time limit for claims - Superseded by ESC D28 D14. Division of a company on a share for share basis - Superseded by SP5/85 D15. Accommodation let by owner-occupier - Superseded by SP14/80 D16. Interests in possession

D17. Finance Act 1965 Section 29(2)

D18. Value shifting: Section 30 TCGA 1992 (Section 26 CGTA 1979)

The Revenue Law Committee of the Law Society raised with the Commissioners for Her

Majesty’s Revenue and Customs a problem arising out of the widely drawn provisions of Section 30, which problem was causing concern among those dealing with agricultural properties.

The Committee pointed out that there are instances where a farmer who owns the land he farms may decide to retire and may wish to hand over the farming business, possibly to his son, while raising capital for himself. He therefore enters into two transactions:

(a) lease of the farm at a rack-rent to his son on normal agricultural terms; and (b) sale of the freehold, subject to the lease to the son, to an outside investor, often an

institutional buyer.

The market price paid by the institutions is for the tenanted value of the property and this is the value on which the retiring farmer pays capital gains tax. He will undoubtedly have reduced the value of his asset by the grant of the tenancy and as a result paid capital gains tax on a tenanted rather than vacant possession value basis.

The Commissioners for Her Majesty’s Revenue and Customs have now confirmed that in the precise circumstances mentioned above they would take the view that Section 30 cannot and should not apply and accordingly that they do not regard that section as giving rise to an increased charge to capital gains tax when a farmer enters into the two transactions mentioned.

D19. Replacement of business assets in groups of companies

To obtain the benefit of Section 175 TCGA 1992, the company making the gain during the replacement of business assets by a group of companies must be a member of a group and the company carrying out the complementary transaction must be a member of the same group, as defined by Section 170(2) TCGA 1992, when the transaction is carried out.

The Consultative Committee of Accountancy Bodies raised with HM Revenue and Customs the problem of defining the membership of a group of companies for the purpose of replacement of business assets bearing in mind that the replacement acquisition may take place at any time within a period beginning twelve months before and ending three years after the disposal (or such longer period as the Commissioners for Her Majesty’s Revenue and Customs may be notice in writing allow).

The Revenue take the view that to obtain the benefit of s175 the company making the gain or the qualifying replacement must be a member of a group and the company carrying out the

complementary transaction must be a member of the same group when that transaction is carried out. The concept of ‘same group’ is as defined in Section 170(10) TCGA 1992.

Thus, if company A makes a gain at a time when it is a member of the X group of companies then that gain may only be rolled over against an acquisition by company B if at the time of that acquisition company B is a member of the X group.

Therefore, company B need not have been a member of the group at the time that company A made the disposal but must be a member of the group by the time that company B makes its acquisition. Similarly, company A must be a member of the group at the time that it makes its disposal but need not be a member of the group at the time that company B makes the

corresponding acquisition.

D20. Retirement relief: Change in business during 10 years before disposal

D21. Time limit for an election for valuation on 6 April 1965 under Paragraph 17,

Schedule 2, TCGA 1992 (Paragraph 12 Schedule 5 CGTA 1979): Company leaving a group: Sections 178 and 179 TCGA 1992 (Section 278 ICTA 1970)

The time limit for the making of an election for valuation on 6 April 1965 under Paragraph 17 Schedule 2 TCGA 1992 is two years from the end of the year of assessment or accounting period within which the disposal took place, or such further time as The Commissioners for Her

Majesty’s Revenue and Customs may allow. The Commissioners for Her Majesty’s Revenue and Customs will exercise their discretion under paragraph 17(3) to extend the time limit as

appropriate where a company ceases to be a member of a group of companies and as a result a chargeable asset acquired from another member of the group within the past six years is deemed to have been disposed of (and reacquired) immediately after the acquisition (Sections 178 and 179 TCGA 1992).

D22. Transfer of business to a company - Superseded by ESC D22 D23. Non-resident company: Section 13, TCGA 1992

Where a United Kingdom participator in a non-resident company which would be a close

company if resident in the United Kingdom is chargeable to capital gains tax on a proportion of a capital gain accruing to that company, tax credit relief may be given against United Kingdom capital gains tax for the appropriate proportion of any overseas tax payable by the company in the country where it is resident in respect of its gain under Section 277 TCGA 1992; alternatively, under Section 278 TCGA 1992, the appropriate proportion of the overseas tax may be deductible in computing the participator's gains to the extent that the overseas tax has not qualified for relief under Section 277 TCGA 1992.

D24. Initial repairs to property: Section 38(1), TCGA 1992

Expenditure on initial repairs to a property (including expenditure on decorations), undertaken in order to put it into a fit state for letting and not allowable for the purposes of Schedule A, is regarded as allowable expenditure for capital gains tax purposes under Section 38(1) TCGA 1992.

E. Statements relating to Inheritance Tax (also applicable where tax charged is Capital