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HMRC internal manual

Capital Gains Manual

Pre-commencement liabilities

A chargeable gain under TCGA92/S284A (3) arises only where the relevant circumstancesoccur on or after 9 March 1999, see CG13655. Cases may come to light where thecircumstances occurred before 9 March 1999 and the taxpayer wishes to ignore the previousconcessionary relief. The proper treatment of any such cases will depend on the full factsand circumstances. But in particular it will depend on whether the taxpayer’s liabilityfor the chargeable period in which the concessionary relief would normally be recovered isfinal or not.

Liability for period of recovery not final

There is no basis in law for recovering concessionary relief without the agreement ofthe taxpayer by taking it into account in computing their tax liability for the laterchargeable period in which it would normally be recovered. If the liability for the periodin which the concessionary relief was originally allowed

  • is still open, it should be settled on the basis that no concessionary relief is due
  • is not open, a ‘discovery’ assessment under TMA70/S29 may be possible. General guidance on when a discovery assessment can be made is at EH562 - EH565, for periods within Self Assessment, or AP2149 - AP2160, for periods before Self Assessment. However, in any case where you consider that an assessment should be made, you should consult Capital Gains Technical Group before taking any action to recover the earlier concessionary relief.

Liability for period of recovery final

If the taxpayer has already accepted that the previous concessional relief should berecovered in the later year and liability for that year is final, it is not possible toreopen the assessment. However the taxpayer can make a valid error or mistake relief claimunder TMA70/S33, see IM3750 - IM3755. Whether the claim will be valid will depend on

  • whether the previously generally prevailing practice was to follow through the concessionary relief and accept liability in the later year
  • whether the particular issue in the later year had been addressed specifically
  • the ‘reasonable and just’ amount of any relief in all the relevant circumstances of the case, in accordance with TMA70/S33 (2) and (3).

Whilst any claim to error or mistake relief would have to be considered carefully onits merits, cases where such claims are appropriate will be exceptional. There is noevidence to suggest that past practice has been other than for taxpayers to follow throughthe effects of concessions and return later gains accordingly. Even if that were shown notto be the case in any particular instance, the Board would have to take into account thereduced liability of the earlier year resulting from the concessional treatment.

So even if an error or mistake relief claim were appropriate in principle, it is quiteunlikely that any actual relief will result, once all the relevant facts and circumstanceshave been taken into account, including the fact that in strictness chargeable gains foran earlier period equal to the amount of chargeable gains for which error or mistakerelief is being sought - will have been excluded from tax.