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HMRC internal manual

Capital Gains Manual

Land: exchange of joint interests: exchanges of unequal value

Where, in the case of any of the joint owners, the value of the interests received on the exchange does not equal the value of the interests relinquished, an appropriate equalisation payment will generally be made.


A and B who are not connected persons, are equal joint owners of Blackacre (30 acres of farm land) having purchased it in 1986 for £60,000 (including incidental costs), each contributing £30,000.

In September 2008 they exchange interests so that thereafter A owns absolutely 20 acres of Blackacre and B 10 acres. At the date of exchange, the values of the 2/3 and 1/3 share in Blackacre are £300,000 and £150,000 respectively. An equalisation payment of £75,000 is made by A to B.

The chargeable gains (and acquisition costs of the assets retained) are as follows: -

Disposal by A

  Consideration received 75,000 (value of half share of 20 acres received
  for half interest in 10   less £75,000 paid)
Less cost 10,000  
Gain   65,000  

Acquisition by A

Consideration given for half interest in 20 acres is £150,000 (value of half share of 10 acres plus £75,000 paid).

Therefore, on a claim being made, full roll-over relief is available since the consideration for the acquisition exceeds the disposal proceeds and the chargeable gain is NIL.

Revised acquisition cost of 20 acres by A: -

  £ £
1986   20,000
2008 150,000  
less roll-over relief 65,000 85,000

Disposal by B

  Consideration received for half 150,000 (see acquisition by A)
  interest in 20 acres    
less cost 20,000  

Acquisition by B

Consideration given for half interest in 10 acres is £75,000 (see disposal by A).

Therefore, on a claim being made, partial “roll-over” relief is available since only part of the disposal proceeds have been reinvested. The amount not being reinvested (£75,000 = the cash received) remains chargeable.

Thus the chargeable gain is £75,000.

Revised acquisition cost of 10 acres by B: -

  £ £
1986   10,000
2008 75,000  
less roll-over relief 55,000 20,000