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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Bare trusts: asset pooling: land: Warrington v Brown

In Warrington (or Jenkins) v Brown, 62TC226, members of a family had put into a trust various pieces of land. The purpose was to maintain the continuity of the family farming unit. The beneficial interests were expressed as a percentage of the value of the property as a whole, calculated by reference to the values of what were originally put in. The court had to decide on the position when a member withdrew the same piece of land as he had put in. Knox J held that there was no disposal because one had to look at the interests in the mass and not at the individual case. It was not a case of every member disposing of their interest in that piece of land. The reasoning of the judge suggests that there would have been no disposal if a different piece had been removed.

The documentation needs to be carefully considered before it is accepted that the decision in Warrington v Brown applies.

It follows from what the judge says that this is a situation in which TCGA92/S43 applies. The interest in the mass derives from the original asset put into the pool by the taxpayer, and the asset taken out is derived from the interest in the mass. Subject to rebasing, the cost to the taxpayer when he or she disposes of the asset taken out is the original cost of the first asset.

Where joint owners of land exchange their interests roll-over relief may be due in some circumstances, under the provisions of TCGA 1992/S248A - 248E in relation to disposals on or after 6th April 2010 , see CG73002+, and under the terms of ESC/D26 in relation to disposals prior to 6th April 2010, see CG73015+.

NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. For indexation allowance see CG17207+ and for taper relief see CG17895+.