CG61810 - Roll-over relief: reorganisations of constituencies: successor association

Disposals to a Successor Association – TCGA92/S264(4)

Where the property is disposed of to a successor association, the existing association and the successor association are treated for capital gains purposes as if the land disposed of was acquired from the existing association for a consideration of such an amount as would secure that, on the disposal, neither a gain nor a loss accrued to the existing association. The successor association is treated as having incurred the same costs as the existing association.

These rules apply also if the land is disposed of by the existing association to the successor association through an intermediate body, that body being treated as having incurred the same costs as the existing association and the successor association being treated as incurring the same costs as the intermediate body.

Consideration Transferred to a Successor Association – TCGA92/S264(6)

Where part or all of the disposal proceeds are transferred to a successor association, the consequences are as follows.

  1. If the existing association transfers the whole of the sale proceeds to the successor association, then the provisions for roll-over relief on the replacement of business assets in TCGA92/S152 to TCGA92/S158 (as well as the other provisions of that Act) have effect as if the land had been the property of the successor association since it was acquired by the existing association and as if it had been disposed of by the successor association.

  2. If the existing association transfers only part of the sale proceeds to the successor association, then the provisions for roll-over relief on the replacement of business assets in TCGA92/S152 to TCGA92/S158 (as well as the other provisions of that Act) have effect as if the successor association had had an undivided share in the property, equal to the proportion which the part of the proceeds transferred bears to the whole of the proceeds, since the existing association had acquired it, and had disposed of that share.

The instructions in CG60250+ (roll-over relief), modified as necessary, apply as they would apply to an association claiming relief by virtue of TCGA92/S158 (1)(e).

The following example illustrates the operation of roll-over relief in these circumstances.

A local constituency party is wound up following a change in constituency boundaries and its headquarters building which cost £50,000 in October 1998, and has been used for the activities of the association ever since, is sold on 31 May 2019 for net proceeds of £1200,000. The whole of the sale proceeds are transferred to a successor association and are used to acquire a new property which costs £140,000 and is to be used for the activities of the association. The new property is acquired on 1 July 2019 and the successor association claims roll-over relief under TCGA92/S152. Full relief is due because all the proceeds have been used to acquire a new qualifying asset and the old asset had been used and occupied only for the purposes of the association throughout the period of ownership. The allowable expenditure on the property disposed of is £84,550 (£50,000 + £34,550 indexation allowance [£50,000 x .691]); and the acquisition cost of the new property is therefore reduced to £104,550 (£140,000 - (£120,000 - £84,550)). Thus the whole gain of £35,450 would be rolled over.