Capital gains: Contracts completed after ordinary notification period
Published 15 March 2023
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Who is likely to be affected
Any person that makes a chargeable gain or an allowable loss on the disposal of an asset under an unconditional contract, where that asset is conveyed or transferred over six months after the end of the tax year for the disposal, or, for companies, one year after the end of the accounting period.
General description of the measure
This measure applies in relation to chargeable gains or allowable losses accruing on the disposal of an asset under an unconditional contract.
It modifies, in certain cases, the operation of the period in which taxpayers must notify HMRC that they are chargeable to Capital Gains Tax (CGT) or Corporation Tax, the time limits for assessments in relation to chargeable gains and the time limits for claiming allowable losses.
Policy objective
The measure promotes fairness and consistency in the tax system and removes potential avoidance opportunities by ensuring HMRC can assess tax due in circumstances where more than four years pass between an unconditional contract being entered into and an asset being conveyed or transferred. It also provides a taxpayer safeguard by allowing a corresponding time period to claim allowable losses.
Background to the measure
This measure was announced at Spring Budget 2023.
Detailed proposal
Operative date
This measure will have effect in relation to assets disposed of and acquired under an unconditional contract entered into on or after 1 April 2023 for companies and 6 April 2023 for individuals, trustees and personal representatives of estates.
Current law
Section 28(1) of the Taxation of Chargeable Gains Act (TCGA) 1992 prescribes the time of disposal and acquisition of an asset disposed of and acquired under an unconditional contract.
Section 7 of the Taxes Management Act (TMA) 1970 and paragraph 2 of Schedule 18 to the Finance Act (FA) 1998 concern, respectively, the giving to HMRC of notice of chargeability to income tax and CGT and to corporation tax.
TMA 1970, sections 34 and 36 and FA 1998, Schedule 18, paragraph 46 concern time limits for assessments.
TMA 1970, section 43 and FA 1998, Schedule 18, paragraph 55 concern time limits for making claims.
Proposed revisions
Legislation to be introduced in Finance Bill 2023 will insert a new section 28A into TCGA 1992. This will modify the application of TMA 1970 sections 7, 34, 36 and 43 of and FA 1998, Schedule 18, paragraphs 2, 46 and 55 so that the relevant notification periods and assessment and claim time limits operate by reference to the tax year or accounting period when an asset is conveyed or transferred rather than the tax year or period in which the contract for the disposal was made.
These modifications will apply for CGT where the conveyance or transfer of an asset takes place after the date six months after the end of the tax year in which the disposal is treated as taking place; and for corporation tax the date one year after the end of the accounting period for the disposal.
Summary of impacts
Exchequer impact (£m)
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| — | nil | nil | nil | nil | +5 |
These figures are set out in Table 4.1 of Spring Budget 2023 and have been certified by the Office for Budget Responsibility . More details can be found in the policy costings document published alongside Spring Budget 2023.
Economic impact
This measure is not expected to have any significant macroeconomic impact.
Impact on individuals, households and families
This measure is estimated to affect approximately 70 individuals in 2027-28 and 410 per year longer term, who will need to declare any gains under an unconditional contract in the usual way. Customer experience is expected to remain broadly the same as this change does not significantly alter existing processes. The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not expected that there will be adverse effects on any group sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on an estimated 50 businesses in 2027-28 and 130 per year longer term who will need to declare any gains under an unconditional contract in the usual way. One-off costs will include familiarisation with the changes. Continuing costs could include calculating the gain and providing additional information to HMRC where a business makes a gain under an unconditional contract affected by this measure. Customer experience is expected to remain broadly the same as this change does not significantly alter existing processes. This measure is not expected to impact civil society organisations.
Operational impact (£m) (HMRC or other)
There will be a negligible operational impact on HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through disclosures of new avoidance schemes to circumvent the measure, and through communication with affected taxpayers and practitioners.
Further advice
If you have any questions about this change, please contact the CGT policy team at cgtbudget@hmrc.gov.uk