Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
, see all updates

Roll-over relief: reorganisations of constituencies: successor association

Where part or all of the disposal proceeds are transferred to a successor association, the consequences are as follows.

  1. If the existing association transfers the whole of the sale proceeds to the successor association, then the provisions for roll-over relief on the replacement of business assets in TCGA92/S152 to TCGA92/S158 (as well as the other provisions of that Act) have effect as if the land had been the property of the successor association since it was acquired by the existing association and as if it had been disposed of by the successor association.

  2. If the existing association transfers only part of the sale proceeds to the successor association, then the provisions for roll-over relief on the replacement of business assets in TCGA92/S152 to TCGA92/S158 (as well as the other provisions of that Act) have effect as if the successor association had had an undivided share in the property, equal to the proportion which the part of the proceeds transferred bears to the whole of the proceeds, since the existing association had acquired it, and had disposed of that share.

The instructions in 

CG60250+ (roll-over relief), modified as necessary, apply as they would apply to an association claiming relief by virtue of TCGA92/S158 (1)(e).

The following examples illustrate the operation of CG61820(a) and (b) above.

A local constituency party is wound up following a change in constituency boundaries and its headquarters building which cost £10,000 in October 1968, and has been used for the activities of the association ever since, is sold on 31 May 1983 for net proceeds £80,000. The whole of the sale proceeds are transferred to a successor association and are used to acquire a new property which costs £80,500 and is to be used for the activities of the association. The new property is acquired on 1 July 1984 and the successor association claims roll-over relief under TCGA92/S152. Full relief is due because all the proceeds have been used to acquire a new qualifying asset and the old asset had been used and occupied only for the purposes of the association throughout the period of ownership. The allowable expenditure on the property disposed of is £10,650 (£10,000 + £650 indexation allowance [£10,000 x .065]); and the acquisition cost of the new property is therefore reduced to £11,150 (£80,500 - (£80,000 - £10,650)). Thus the whole gain of £69,350 would be rolled over.

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. Companies and other concerns within the charge to Corporation Tax are not affected by these changes. For indexation allowance see CG17207+ and for taper relief see CG17895+.

A local constituency party is wound up following a change in constituency boundaries. Its headquarters building which cost £10,000 in October 1968 and has been used for the activities of the association ever since, is sold on 31 May 1983 for net proceeds of £80,000. The whole of the proceeds are transferred to a successor association. On 1 July 1984 the successor applies the proceeds to acquire a new property for £60,000 to be used for the activities of the association and to acquire government stocks for £20,000. In this case, part of the gain equal to the £20,000 not used to acquire new qualifying assets would be a chargeable gain on the successor association assessable for 1983-84 and the acquisition cost of the new property would be reduced to £10,650.

A local constituency party is wound up following a change in constituency boundaries. Its headquarters building which cost £10,000 in October 1968 and has been used for the activities of the association ever since, is sold on 31 May 1983 for net proceeds of £80,000. Part of the sale proceeds (£60,000) is transferred by the existing association to the successor association and part (£20,000) is retained. The successor association uses the proceeds transferred to acquire a new property for £70,000 and this property is to be used for the activities of the successor association.

The existing association is charged on a gain of £17,337 (£69,350 x 25%) for 1983-84.

The successor association is treated as if it had had an interest in 75 per cent of the property since October 1968 and qualifies for roll-over relief in full. The acquisition cost of the new property is then £17,988 (£70,000 - (£60,000 - £7,988)).