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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Private residence relief: settled property: disposals on or after 10 December 2003: property affected by claim for gift hold-over relief: example

TCGA92/S226A

On 31 January 2004 Mary gave a house to a family trust and claimed gift hold-over relief under TCGA92/S260 (see CG67030+). The house was occupied by Mary’s mother under the terms of the settlement from 31 January 2004. On 20 August 2007 the trustees sold the house.

TCGA92/S226A applies so Mary’s claim for gift hold-over relief prevents the trustees from claiming private residence relief under TCGA92/S225 on the disposal of the house.

If Mary is still in time to amend the claim for gift hold-over relief she can withdraw the claim. In that case, she would be treated as though the claim for gift hold-over relief had never been made and she would be liable for capital gains tax on the chargeable gain arising from the disposal to the trust in the 2003/2004 tax year. This would enable the trustees to claim private residence relief under TCGA92/S225 for the whole period of ownership and obtain a repayment of any tax already paid.

If Mary did not claim gift hold-over relief in relation to the transfer on 31 January 2004 until after the trustees had returned the gain and claimed private residence relief in relation to the disposal on 20 August 2007, the gain arising to the trustees on that disposal would be recalculated taking into account the held-over gain and the trustees would have a capital gains tax liability for the 2007/2008 tax year. TCGA92/S226A would deny any private residence relief for the whole of the trustees’ period of ownership.

Claims for gift hold-over relief are governed by TMA70/S42 and the normal time limits for claims and amending claims made within or outside a tax return apply. Guidance on claims for gift hold-over relief is given at CG66910+.