There is evidence that HM Revenue and Customs (HMRC) are following up provisional Business Asset Roll Over Relief forms, reminding taxpayers to submit the valid claim. On occasion this has been noted to be after the deadline for submitting a valid claim has passed.
Here’s what you must remember when making a Business Asset Roll Over Relief claim.
For full Roll Over Relief, the disposal proceeds must be fully reinvested in qualifying assets within three years of disposing of the old asset, or up to one year before.
These limits can be extended where the taxpayer can show that:
- They had a firm intention to acquire new assets within the time limit or sell the old asset within 12 months after the date the new assets were acquired AND
- They were prevented by some fact or circumstance beyond their control from meeting the time limit AND
- They acted as soon as they reasonably could after ceasing to be so prevented.
It is, however, key that a timeline is presented to HMRC with evidence of the factors preventing the reinvestment. The more detailed it is, the better.
If the taxpayer is partway through the reinvestment period but it is looking increasingly unlikely whether full reinvestment is going to be possible or they will have to rely on HMRC allowing an extension to the time limits, then it would be worth looking at whether it is worth settling tax now to avoid paying interest on the unpaid Capital Gains Tax. HMRC’s current rate of interest is 5.5%, with effect from 22 November 2022.
A valid claim must be made by the fourth anniversary of the end of the tax year in which the new assets were acquired or the tax year in which the old asset was disposed of, if later.
HMRC manual paragraphs SACM10035 and SACM10040 indicate that HMRC has discretion to accept late claims where the claim is late for reasons outside the taxpayers control. If you are to make such a claim on a taxpayer’s behalf, it is worth getting as much information about the delay as possible. As above, the more reasons you can give them as to why the taxpayer genuinely was unable to report the claim will add credence to the argument.
If HMRC do write asking your client to check their claim and the deadline has passed, it is worth considering whether HMRC are out of time to make an assessment of the underpaid tax. HMRC have 4 years from the end of the tax year in question to issue a discovery assessment, however if full disclosure has been made at the time of the gain then HMRC may have to rely on demonstrating careless or deliberate behaviour to go back further, 6 years and 20 years respectively.
*The views expressed are the author's and not ICAEW's.