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HMRC internal manual

Capital Gains Manual

Repudiation of concessions which defer capital gains charges: Background

A taxpayer might seek to exploit a concession which defers a tax charge by taking the benefit of the concessional relief, but then computing a gain on a later disposal on a strict statutory basis, ignoring the effect of the previous concession. In some circumstances it might not be possible to counter such exploitation without specific legislation. For instance, the year of concessional relief might be closed and making a discovery assessment to recover the relief might not be possible.

A measure to counter such potential exploitation was introduced in FA99, as new TCGA92/S284A and TCGA92/S284B. It works as a back-stop, by creating a chargeable gain which arises only if the taxpayer fails to accept the consequences of the previous concessionary relief. Any such failure gives rise to a chargeable gain equal to the amount of that relief.

This statutory charge is intended to be a deterrent. In practice the vast majority of taxpayers can be expected to continue with normal practice and carry through the effect of a concession to any later disposal, accepting the increased gain (or reduced loss) which arises as a consequence. So any actual charge under the FA99 provisions should be extremely rare.

For details of the provisions, see CG13655 - CG13662.