CG66451 - Reliefs: Capital Gains Tax and Gifts: Chargeable Gifts: Assessments
Amending the donor’s assessment
{#}Whom you assess
As CG66450 explains, unless hold-over relief has been claimed or a no gain/loss exception applies, a donor may have made a chargeable gain on the gift, calculated with reference to the market value of the asset at the date of disposal.
Where a donor has made a chargeable gain, they are responsible for paying any Capital Gains Tax due and should declare the disposal on their return or otherwise notify HMRC that there is an amount of CGT to pay. Likewise, if it is found that a chargeable gain accrued which was not declared or notified, and CGT is due, then an assessment should be made in respect of a liability to CGT for the donor.
However, under TCGA92/S282, if the donor has been assessed to Capital Gains Tax on a gift and fails to pay all the tax within twelve months of the due and payable date, then you can recover the outstanding tax from the donee. TCGA92/S282 then provides a right for the donee to recover any tax paid from the donor.
Where the assessment is made in respect of a chargeable gain which accrued as a result of a clawback of relief following a settlement becoming settlor-interested under TCGA92/S169C (see CG66888 for hold-over relief under TCGA92/S165 for gifts of business assets, and CG67032 for hold-over relief under TCGA92/S260 for gifts of non-business assets)
- references to the donor are taken to be to the person who made the gift on which hold-over relief was initially claimed, and
- references to the donee are taken to be to the trustees of the settlement to whom the gift on which hold-over relief was initially claimed was made to
{#}Time limits
If you decide to assess the donee (in the name of the donor), you can only do so within two years from the date the tax was originally payable by the donor.
{#}Amending the donor’s assessment
If the donee pays the tax on their assessment, you should discharge the donor’s assessment by the same amount.
{#}Making the donee’s assessment
The amount on which the donee is to be charged (in the name of the donor) cannot exceed the lesser of:
- the amount of the gain accruing on the gift
and
- the amount which brings into charge the tax unpaid
The donee’s rate of liability is irrelevant and they are not allowed to use any capital losses in respect of this assessment.
The donor has no right of appeal against an assessment made on the donee. Where there is more than one donee you apportion the amount assessable between them.
{#}Example
In 2019/20, Douglas gives a property to Amber. Both are higher-rate taxpayers. The chargeable gain arising to Douglas as a result of the gift is £48,000. Douglas has gains on disposals of other assets which amount to £15,000 and allowable losses of £3,000. The net gains are chargeable at 28%.
Douglas filed his return which included Capital Gains Tax as follows:
£
Net chargeable gains 60,000
Less annual exempt amount 12,000
Chargable 48,000
Tax due 48,000 @ 28% 13,440
Douglas fails to pay any of the tax. In December 2022, an assessment is made on Amber to recover the tax on the gift.
That assessment should be made for 2022/23 (see Hamar v HMRC TC01529) and cannot exceed the lesser of:
- the amount of the gain arising on the gift (£48,000)
and
- the amount which brings into charge the tax unpaid (also £48,000, as Douglas and Amber have the same marginal rate for residential property 28%)