Holdover relief and NRCGT - Guidance wrong?

New Section 261ZA TCGA seems pretty clear that holdover relief is available for a chargeable transfer of a property from a non-resident to a non-resident (e.g. a trust distribution) that would otherwise incur NRCGT - in fact the title of the section is “Gifts of UK residential property interests to non-residents” .

Despite that, the guidance in HS295 (2016) states that “Where disposal of a UK residential property is disposed of (sic) as a gift from a non-UK resident to a UK resident, non-resident CGT gains may be included as held-over gains. A relief (sic) is denied in cases where a gift of UK residential property interests chargeable to non-resident CGT is made to a non-UK resident”.

CG67031 simply states that “The transferee must:…For 2013/14 and subsequent years, be resident in the UK.”

I am guessing that the manual is simply out of date but is it safe to assume that whoever updated HS295 made a mistake. It isn’t even a case of missing the change as they have updated the text to take into account NRCGT but included this statement which appears to contradict the legislation. The poor grammar suggests they weren’t giving it their full attention.

Please assure me I am not going mad (on this occasion).

Andrew Goodman
Osborne Clarke

Does anyone have a view on this or received clarification?

Peta Shanks
Michelmores LLP

In the end, I just assumed it was wrong. The new 2017 text of HS295 is slightly better but still says “In all cases the transferee must be resident in the UK” and “Hold-over Relief is available for a chargeable transfer of a property from a non-UK resident to a UK resident that would otherwise incur non-resident Capital Gains Tax.” The latter is at least formally correct, if misleading.

Andrew Goodman
Osborne Clarke LLP

TCGA 1992 s.261ZA modifies the “normal” s.260 rule and as a consequence non-resident CGT disposals to non-resident transferees are subject to hold-over relief.

HS295 is incorrect.

Malcolm Finney

Thank you. That is exactly the conclusion I reached as well. I thought I must be missing something or going mad - I couldn’t quite believe that HMRC’s manual is still wrong. Technical support also still seem to think the transferee needs to be UK resident. The legislation is quite clear though.

Peta Shanks
Michelmores