There are two issues to consider here:
- Whether the property being sold and the replacement property qualify as Furnished Holiday Lettings (FHL) and conditions are met to allow rollover relief to be claimed, and
- The 30 day reporting requirements.
Furnished Holiday Letting & Rollover Relief
Rollover Relief under s152 TCGA 1992 is usually only available for assets used in a trade. However, by virtue of s241 TCGA 1992 rollover relief is also available to a gain made on a FHL. Strictly, the assets being disposed of and the replacement asset must be used within the qualifying business at the time of sale and acquisition. Therefore if the “old” FHL business is deemed to end on the sale of the sole letting property then, before the new FHL property is acquired, there will be period where no FHL is being carried on. However, HMRC Statement of Practice SP8/81 confirms that where the gap between the two businesses is no more than 3 years, they are prepared to treat the two businesses as successive and so rollover relief will be available. Similarly, HMRC state in their Property Income Manual at PIM2510 that they are prepared to accept, as a rule of thumb, that where different properties are let but gap between the two lettings is no more than 3 years, they will accept the same letting business is being carried on.
It may well be that on the acquisition of the replacement property, various repairs or alterations may be required before it is suitable for letting and actually let. Where minor repairs are required and the property is let without reasonable delay, this is acceptable – see CG60270. If capital improvements are carried out and completed within a “reasonable period” a claim can be made under Extra Statutory Concession D24 – also covered in CG60270.
Remember when ascertaining whether a furnished letting qualifies as FHL, various conditions in Chapter 6, Part 3 ITTOIA 2005 must be met – see PIM4110. Therefore it should not be assumed that it is enough that the intended use of the replacement property will be as a FHL – care needs to be taken to ensure the qualifying conditions are met.
S153A TCGA1992 allows a provisional claim for rollover relief to be made which under normal circumstances would mean no CGT is payable so long as the new asset is purchased within the relevant period of 36 months and a claim must be made on the tax return for the chargeable period – and possibly on the 30 Day Report as outlined below.
30 Day Reporting Requirements
The 30 day reporting requirements were extended by FA 2019 Sch. 2 cover to disposals by UK residents from 6th April 2020 but, unlike non-residents, UK residents only need to report disposals of residential properties on which a capital gains tax (CGT) liability arises.
If a CGT liability arises then an online report must be made within 30 days following the completion date (paragraph 3). Paragraph 4 states if there is no liability to make a CGT payment on account, no return is required (but not that none can be made). Paragraph 14(2) states:
14(2) For the purposes of this Schedule it is to be assumed that a person has made a claim or election or given a notice if, at the time of the completion of the disposal in respect of which a return is required to be made under this Schedule, it is reasonable to expect that one will be made or given.
Therefore, is it “reasonable to expect” that a provisional rollover relief claim will be made under s153A TCGA 1992 at the completion date of the sale? As the rules are relatively new and HMRC guidance is rather thin on the ground, a cautious approach would be to submit an online report including a note that a provisional rollover claim is to be made on the SA Tax Return.
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