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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Dwellings subject to ATED: persons chargeable: individuals etc with ‘indirect’ interests in residential property

Where a partnership has an interest in residential property worth more than £2 million and one or more companies is a member of the partnership, the property is chargeable to ATED (subject to any relief from ATED that is available). The liability to pay the tax falls on the ‘responsible partners’.

Where individuals, trustees of settled property or personal representatives of deceased persons who are members of the partnership dispose of their interest in the partnership’s residential property (either because the partnership disposes of the property or because they reduce their partnership share in the property) the disposal could give rise to a gain or loss that is ATED-related. The gain or loss could therefore be subject to capital gains tax under TCGA92/S2B.

TCGA92/S2B (1) and (2) prevents individuals etc in this position from being subject to capital gains tax under section 2B. Subsection (2) (a) treats them as persons ‘excluded’ from the scope of the charge where the residential property is a partnership asset.

A similar position applies where individuals, trustees or personal representatives are participants in a ‘relevant collective investment scheme’ that has an interest in residential property worth more than £2 million. A ‘relevant collective investment scheme’ is one which is neither a unit trust scheme nor an open-ended investment company (TCGA92/S2B (10)). The scheme could be subject to ATED on such a residential property. The liability to ATED falls on the person who has day to day control over the management of the property subject to the scheme. In this guidance the shorthand term ‘manager’ is used.

Where individuals, trustees or personal representatives dispose of their interest in the residential property (either because the scheme disposes of the property or because they reduce their interest in the scheme) the disposal could give rise to a gain or loss that is ATED-related. The gain or loss could therefore be subject to capital gains tax under TCGA92/S2B.

TCGA92/S2B (1) and (2) prevents individuals etc in this position from being subject to capital gains tax under section 2B. Subsection (2)(b) treats them as persons ‘excluded’ from the scope of the charge where the residential property is an asset held for the purposes of a ‘relevant collective investment scheme’.