The reinvestment time limits are set out in s152 (3) TCGA 1992, which requires the new asset to be acquired in the period beginning 12 months before and ending 3 years after the disposal of the old assets or such earlier or later time as the Board may by notice allow.
What happens when the specified time limit for the acquisition of the new asset in the period of 12 months before to 3 years after the sale of the old asset have not been met and you are applying for an extension to these? Where do you start?
HMRC do give examples of circumstances where they may exercise their discretion to extend these time limits in HMRC manual paragraph CG60300, which will always be worth a look. However, you need to sit down with your client to explore in detail the reasons for delay in acquiring the new asset or selling the old asset. Why was this delay outside their control and how was the new asset acquired or the old asset sold? You need to ascertain that the sale or acquisition occurred at the earliest opportunity when the ‘outside your control’ reasons ceased.
Having done this, it is then a case of collecting facts and documents to support the claim, together with a timeline, and presenting this to HMRC.
The farming cases I have come across in practice where successful applications have been made involved:
- A sale of land by a farming partnership 21 months after an interest in a farm was acquired where I was able to show:
a. Negotiations for the sale started, and heads of terms were circulated, within 12 months after the acquisition
b. There was every expectation from my client and their advisers that these would be agreed quickly and swiftly followed by the signing of an unconditional contract
c. Negotiations between my client and the purchaser continued right up to the last moment with this evidenced by the year on the agreement and final changes inked in and initialled on the date this was signed
d. Delays in administering the estate of a partner who had died five years earlier by the solicitor involved
e. Another partner had been put into a care home with the possibility she would be made a ward of court around the time that heads of terms were circulated - The sale of a farm 38 months after work started on the construction of new replacement agricultural buildings on a new site. Here I was able to demonstrate that the delay in completion of the sale was due to difficulties with original planning permission lapsing, changes in mix of affording housing requirements rendering the original contract no longer financially viable to the purchasers, and continuing delays in the purchasers completing the contract despite their already marketing the site for onward sale.
The supporting evidence requested by HMRC in both cases was extensive and demonstrated the value in the client and their advisers having retained emails long after the transactions had completed, discussing in detail the circumstances leading to the delay with the client, downloading planning applications and documents from the internet and being open to consider all available documentation.
As a final point, don’t forget weather conditions, a frequent enemy of farmers, as one of your arguments. In another case, I was aware that the farm was up a steep hill and building contractors would have struggled to be on site in snowy or icy conditions. A quick check of the local press at the time revealed that there were exceptional weather conditions at the time with deep snow drifts of up to 10ft, the army being called in and schools being closed, all facts that the client had forgotten through the passage of time.
*The views expressed are the author’s and not ICAEW’s.