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HMRC internal manual

Capital Gains Manual

Arrival in and departure from the UK: establishing the correct time when a gain arises: dispute over binding agreement

For the years up to and including 2012-13, where the written contract is made after 5 April following the date of departure an assessment to Capital Gains Tax made for the year of departure will only be supportable if there was a binding oral or written agreement in the year of departure. A dispute on this point can therefore be adjudicated by the First-tier Tribunal. If they find as a fact that there was such an agreement in the year of departure they can determine the appeal against the assessment for the year of departure in the appropriate figures. However, if they find there was no agreement they will discharge the assessment.

Where the written contract is made after the date of departure but before the following 6 April an assessment to Capital Gains Tax made for the year of departure will be supportable in law whether or not there was a binding agreement pre-dating departure. This is because Section 2 TCGA 1992 imposes liability whenever an individual is resident or ordinarily resident for any part of a year of assessment (see CG25200 above). If the disposal occurred in the period after the date of departure but before the following 6 April relief from assessment will only be possible if the individual receives the benefit of ESCD2, that is to say if the concessionary treatment applies. Since the First-tier Tribunal cannot concern themselves with the operation of Extra Statutory Concessions the Tribunal would be unable to discharge an assessment made on gains arising in this period.

Referring a question of whether a pre-emigration agreement existed to the First-tier Tribunal in circumstances where the Commissioners for HMRC would, in any event, withhold the benefit of ESCD2 could give rise to criticism of HMRC. This is because such action would substantially remove the benefit of any Tribunal decision made in the individual’s favour. You should therefore consider at an early stage of any enquiry the possibility of withholding the benefit of ESCD2 see CG25793.

When dealing with such cases you should attempt to obtain all facts relevant to a decision on ESCD2 when obtaining facts about the possible existence of a pre-emigration agreement and then make a submission to Specialist PT (Capital Gains Technical Group) in Solihull in appropriate cases.

For 2013-14 and subsequent years ESC D2 no longer applies, so the added operational considerations above are no longer relevant. However it remains necessary to correctly establish the correct date of disposal of an asset to determine in which year or residence period (if it is a split year) the gain or loss actually accrues.