Revoking hold-over relief claim

Trusts Discussion
1

Section 226A(6) TCGA 1992 says: “If a claim for relief under section 260 in respect of an earlier disposal is revoked, this section shall apply as if the claim had never been made”. Can anyone point me to the law on the procedure for revoking a claim e.g in TMA 1970 or any guidance e.g Capital Gains and Self-Assessment ClaimsManual. Has anyone been involved with one? Possibly it just fits into s42 e.g is it a “supplementary claim” (non-legislative term) within s42(9) (SACM3040)?

The point is important not least for whether it must be made in a return or not, time limits, and unsuccessful or late claims (SACM10010 and 10030).

I put a query on the Customer Forum and was referred generically to the Capital Gains Manual and TCGA. My reply was: "
It is unacceptable to provide such a glib, vague and in fact mainly wrong answer. The only place in which revocation of a hold-over relief claim is mentioned is
in s 226A(6) TCGA 1992. No procedure or time limit is set out. There is no mention of ANY of this in the Capital Gains Manual, or in Help Sheet 295 or its
claim form, nor in TMA 1970 (where you would expect the procedure to be set out)." I would question the propriety of responding like that to a likely lay person but it is par for the course. As I am not an Agent, only a humble taxpayer, I can’t use their exclusive forum which presumably provides a superior service to card carrying Party Members.

Jack Harper

Jack Harper

2

You don’t say in which year the held-over gain arose.

“s 42(1) [TMA 1970] Where any provision of the Taxes Acts provides for…any…thing to be done, on the making of a claim, this section shall, unless otherwise provided, have effect in relation to the claim.”

As you say, there is no other provision in s 226A(6) that provides otherwise.

“The Taxes Acts” includes TCGA 1992. s 118(1).

Therefore the general four year time limit in s 43(1) applies.

The 2020/21 and 2021/22 returns can be amended (online or on paper), so if the original claim was made in one of those returns, the return must be amended. This applies to 31/1/23 for the earlier year and 31/1/24 for the later. It might be possible to use the sch 1A TMA route for claims outside of these dates.

Revocation re 2018/19 and 2019/20 can’t be made in a return; Sch 1A applies. The right to (un)make a claim for 2018/19 expires on 31/1/23 and a year later for 2019/20.

Sch 1AB doesn’t seem appropriate, as I assume that you are asking for an earlier assessment to be increased.

It’s too late if the heldover gain was before 6/4/18.

See CRC v RAFTOPOULOU for a doomed attempt to extend the four year deadline by invoking s 118(2).

https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWCA/Civ/2018/818.html&query=(raftopoulou)

Surely the quid pro quo to the right to revoke is the right of HMRC to assess the tax that had been it transpires, provisionally deferred and as a general rule HMRC can’t assess more than four years after the end of the yoa without the taxpayer or someone acting on his/her behalf doing something bad…

If the law did allow revocations more than four years ago, HMRC’s right to assess wouldn’t be curtailed by the safeguards in s 29 and s 35. There are some circumstances when ‘no fault’ assessments can be raised by HMRC but I don’t think that this is one of them.

3

I cannot fault your cogent analysis.

1 I note that s226A(4) refers only to sub-section (3) and not to (6) so that the adjustments covered in (4) are inapplicable and one must fall back on the general rules about claims in s42 TMA (procedure) and 43 (time limits) if a “revocation” of a claim is covered by them; and it is not explicitly

2 A revocation is not a “supplementary claim” as that is defined by s42(9) to require an error or mistake and it plainly doesn’t. There is no mention of a right to amend a claim in s42 save for subs (9).

3 Arguably a revocation constitutes an “amendment” to a claim: s42(5). Here s9ZA supplies the time limit. s42(11) deals with other claims via Sch 1A and para 3 supplies the time limit. Both time limits are short.

4 The conclusion must surely be that the time limits for revoking a claim are those in 3 above and that in practice any additional time within the rest of the 4 years in s43(1) will never be relevant

5 sections 43A (2)(b)and 43B (1)(b) use the magic word “revoke” and add “vary” for good measure, the first in the past tense. s43C curiously does not. These operate in s29 circumstances and while s36 (3) is specifically applied by s43C (1) it mentions only a “relief or allowance” and not a revocation or variation. So where s43A applies a revocation is possible save that (2)(b) rules that out where the claim has become irrevocable by virtue of an enactment, which presumably includes those in 3 above setting time limits, regardless of s29 assessment time limits. If a s29 assessment is made on a taxpayer who has not made a return at all (nor been sent one in which case s28C would apply) he would only be able to invoke the narrower ambit of s36(3) so no revocation or variation.

I have the temerity to suggest that it would have been better if the law dealt intelligently, comprehensibly and consistently with a “revocation” (or “variation”) starting with a definition of it so that wherever it appeared, e.g. in s226A TCGA, the relevant procedural rules including time limits would be readily ascertainable, comprehensible and consistent. And that the failure to refer explicitly to such rules in s226A means that no one thought about the issues.

Jack Harper

4

I’ve considered this over the years and from memory don’t recall seeing much (if any) commentary on revocation.

I concluded that “revocation” is in essence an “amendment” to an existing claim but not because of any error or mistake [TMA 1970 s. 42(11)]. TMA 1970 s9ZA provides that the time limit on the making of an amendment is 12 months after the filing date [the filing date for “year 1” is 31 January of “year 2”]. Hence, the deadline for tax year 21/22 would be 31 January 2024.

If correct, this does mean that although a claim for CGT hold-over relief may be made up to four years after the end of the tax year in which a CGT disposal is made [TMA 1970 s43(1)] the filing deadline for an amendment (ie revocation) expires within this four year period at a time when it may well be unclear as to the pros/cons of lodging a claim.

If there is any serious likelihood that any claim may need to be revoked (within a relatively short time frame) the best option may be to defer lodging any claim as late within the four year period as possible by which time the decision to claim (or not) relief can be as informed as possible (but this would mean any CGT would need to be paid and then subsequently recovered).

Malcolm Finney

5

I agree very much and note that s42(2) requires the claim to be made in a return when one has been issued. Furthermore s113(3) surely requires the claim to be made by the document attached to HS295 or separately downloadable. A claim made in the appropriate form just before the expiry of the 4 year period would be valid though not made in a return but only if no return was ever issued. If it was, then arguably once the return-related time limit has expired a later claim would technically fall to be dealt with as “late” (SACM10030), qualifying Malcolm’s last paragraph.

Jack Harper

6

TMA 1970 s 42(2) provides for a claim for hold-over relief to be included in a tax return but only if (1) notice under s8 has been served AND (2) “… if it could, at that or any subsequent time, be made by being so included”.

In the absence of either, or both, (1) and (2) any claim could be lodged outside a tax return but must use the form included with HS 295 [TMA 1970 s113].

The time limit for a claim whether included as part of a tax return or free-standing (ie not part of a tax return) is the 4 year period. It would seem that if a claim is lodged, say, just before the end of the four year period but a subsequent revocation becomes desirable the time limit for revocation will depend upon whether the claim was lodged as part of a tax return subject to a notice being served or as free-standing; under the former, TMA 1970 s9ZA (2) would apply and under the latter TMA 1970 Sch 1A para 3(1)(a). The former of the two providing the longer period within which to revoke.

Malcolm Finney

7

So to clarify: if a s8 notice was served AND the claim could have been made in it, it cannot be made after the deadline for amending that return even if the deadline is well within the 4 year time limit? But it might be accepted as a late claim with no guarantees.

Jack Harper

8

I don’t believe that is strictly correct.

TMA s1970 s42(2) sets out the mechanics of how a claim must be made
ie any claim must be included in a tax return if notice is served to deliver a return and the claim could have been so included. Once the time period for amending a return has past then no claim can be made in a return.

However, a claim may still be lodged other than by way of inclusion in a return (eg simply by way of letter or completion of form HS295) so long as such claim is made within the four year period (under TMA 1970 s 43(1)).

I think that TMA 1970 ss 42 & 43 serve two different functions with only s43 (not s42) providing time limits within which a claim must be lodged.

Malcolm Finney

9

HMRC do not seem to agree. SACM3030 says; “Where claims CANNOT be made in a return they can be made outside a return.”

The obvious implication is that if they CAN then they must be and not ever outside a return. And if actually made in a return, no revocation during the remainder of the 4 year period after the return finality date has occurred.

I wonder if anyone has concrete experience of HMRC accepting/ refusing a claim, hold-over or otherwise, within the 4 years following the YOA but after the earlier finality date for the return of that year, in which the gain etc was taxable, and which could have been made in it. And on what basis e.g. error or mistake, late, s29. Most taxpayers will be reluctant to delay a claim if significant upfront tax would be payable and there is also the risk, where more than one party must sign, of their later refusing without some quid pro quo or just because it no longer suits them or having fallen out with the other party. It would not surprise me if many unadvised taxpayers lodged delayed claims after filing returns but feedback on the outcome is unlikely to be much publicised.

As Malcolm and I differ so pointedly is there anyone who would be prepared to tell a client (who was made to understand the tax payable and repayable consequences) that their hold-over relief claim need not be made in their timely-filed return but could be postponed until a week before the 4 year period expired? As opposed to telling a client who found themselves in that situation that it was worth making a claim as it might be accepted on some basis.

Jack Harper

10

Indeed. The making or revocation of a claim for, say, 2021/22 made on 31/1/24 must be made by amendment to the return. A claim etc made on 1/2/24 can’t be made in a return and therefore s 42(2) doesn’t apply.

11

I was agreeing with Malcom.

12

If anyone has access to lexisnexis tax, answer can possibly be found here - taken from a quick google search:
Revoking a claim to holdover relief

The claim must be revoked in the same manner in which it was made and all parties to the original claim must consent to the revocation. A claim for holdover relief can be made in the self assessment return or outside of the return.

Earlier disposal: A disposal on which holdover …

Later disposal: A gain on a disposal which wo…

Transferor: The individual or trustees making the …

[
C3.1716 Interaction Of Holdover Relief And PPR Relief | Tolley
](https://www.lexisnexis.co.uk/tolley/tax/commentary/simons-taxes/capital-gains-tax/c3-1716-interaction-of-holdover-relief-

13

I can see the force of the technical argument that Malcolm and Duncan are making. I would feel happier if HMRC’s unequivocal agreement with it could be readily discerned from SACM or otherwise. If a hold-over claim for a disposal in 2021/22 was not made in or by amendment for that year by 1 February 2024 it could not thereafter be made in a return for a later year but it could have been made in the right year’s return.

My uneasiness is heightened by what might be taken as a purposive construction of s42(2). The rules about timing of submission of returns and making amendments have the distinct purpose of achieving finality under the self-assessment system for both taxpayer and HMRC, which makes for better administration. This is why s29 is full of taxpayer safeguards limiting HMRC’s ability to re-open a year where a return was submitted and an assessment/self-assessment has become final. That was HMRC’s trade off restriction for no longer having to be exposed to processing a large number of open years within the former ordinary six year time limit. The trade off for the taxpayer was a corresponding restriction to deal with their affairs exhaustively within a shorter window of April 5 in Year one to January 31 in Year two.

There is now, since 2016, a further area where no return is sent to a law-abiding taxpayer who might therefore have to make a claim outside of the tax return system and that is Simple Assessments made under ss28H and I TMA. My personal experience of this system does not endear it to me but it also was introduced for a purpose (cynically for HMRC as it is hard to see what a taxpayer gets as in most cases HMRC will have just stopped issuing returns to them). s28H(5) requires such an assessment to be based on “information… held by HMRC”. Mine arrived on 3 October 2022 before the expiry of the time limit to notify a chargeable gain, let alone a hold-over relief claim, and before the 31 October deadline for a paper return to include both, and way before 31 January 2023 for online. The insidious feature of this lark is that unless you query it under s31AA you have no right of appeal at all: s31(3A). Mine was wrong and corrected after I queried it and this year I submitted a paper return because the online system had already been consequently programmed to shut me out. My concern here, a separate issue, is for lay taxpayers who do not query within the 60 days.

I do not care which interpretation of s42(2) is right but I do not want to find out for the first time when I submit on, say, 1 April 2026 a hold-over claim that could have been made by 31 January 2024.

Jack Harper

14

Could the recent Upper Tribunal decision in the recent case of E Cumming-Bruce v HMRC be relevant here? It concerned claims for CGT losses and the Tribunal held that since claims for such losses are governed by s 42 and 43 TMA, they could only be made in a tax return and not otherwise. The same provisions of TMA apply to hold over claims.

15

Sorry but, with respect to Lexis Nexis, to which I do not have access, what is the statutory authority, apart from s226A(6) which merely mentions revocation. Where does the law say “The claim must be revoked in the same manner in which it was made and all parties to the original claim must consent to the revocation”? The only procedure I can find for revoking claims (including the quoted words) is in s43A(2)(b) which only applies to s29 assessments. I am happy to acknowledge the common sense nature of the assertion but can you show me in the Manuals or elsewhere a similar assertion by HMRC outside of s29 assessments.

Jack Harper

16

Dear Jack

I don’t have full access but they usually show all the legislation that links to their guidance especially where it comes from the Simon’s section. Just thought if someone had access they might find the legislative pointers to help you all out – just trying to help but shan’t bother in future.

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17

I’m very grateful for the steer Malcolm (citing unhelpful authority as a good advocate should!). I agree that it indicates that my argument that a claim must and must only be included in a return where it can be is at least strongly arguable and until clarified by HMRC should be adopted as the safety first stance. I note that Cotter related to a carry back claim which was held to be a proper claim of Year 2 and therefore could not have been included in the Year 1 return. It has also helped to assuage doubts as to my own sanity (although this has been queried on innumerable other occasions).

Jack harper

18

Juliet of course you should bother in future. That is what the Forum is for. Contributors may not always agree but I’m sure no one thinks that is a reason to put off anyone. On the index of such things your comment was infinitely more cogent and relevant than some of the strange theories advanced on here. I often admire the restraint and patience of those who respond, while I go to lie down in a dark room and take the medication to calm down. Another reason endorsing my retirement.

Jack Harper

19

Thank you Juliet. Juliet quotes from Lexis Nexis to which, like Jack, I do not have access.
The claim must be revoked in the same manner in which it was made and all parties to the original claim must consent to the revocation.

I have in the past, and indeed currently, been unable to find any authoritative support for their statement.

Malcolm Finney

20

HMRC say at SACM3030:

"Examples of claims which cannot be made within a return

*…

  • …
  • …
  • A claim that can still be made after the return amendment window has closed, because the time limit has not yet passed."

Which seems to give the confirmation that Jack seeks.