CG17900 - Taper relief: qualifying holding period

TCGA92/S2A (3), TCGA92/S2A (4)

TCGA92/S2A(3) and (4) TCGA states that the amount of taper relief due depends on the number of whole years in the qualifying holding period and whether or not the asset was a business asset.

Most chargeable gains accruing on or after 6 April 1998 are subject to taper relief except for gains accruing to companies and other concerns within the charge to Corporation Tax.

There are a few types of chargeable gain that never attract taper relief, for example

• royalties received under mineral leases TCGA92/S201.
• cash sums received when a mutual building society or insurance society demutualises TCGA92/Sch A1/para 18, see CG17914.
• a chargeable gain that is treated as accruing to a partner following the cessation of trade by a limited liability partnership TCGA92/S156A or 169A, see CG28020 and CG28025.
• gains of certain non-resident close companies that are treated as accruing to certain UK participators TCGA92/S13(10A), see CG57200+.
• where gifts relief has been obtained under TCGA92/S165 or TCGA92/S260 and a chargeable gain is deemed to accrue to the donee in accordance with TCGA92/ S168(1), see CG67280+.

The basic rule is that the qualifying holding period for an asset is the period between

• the later of 6 April 1998 and the date of acquisition of the asset

and

• the date of disposal of the asset.

The qualifying holding period may be reduced where the taper relief anti-avoidance rules apply, see CG17915-23, The qualifying holding period may also be extended for a gain which accrues on the disposal of shares to which Enterprise Investment Scheme Income Tax relief or deferral relief is attributable if qualifying expenditure on shares in another EIS company is set against it under TCGA92/SCH5B. See VCM43000++.

Where an asset was not acquired but was created by the person making the disposal, for example goodwill, the date of acquisition is the date the asset was created. The date the asset was created is determined as a question of fact on the basis of the evidence available.

Where expenditure is made to enhance the value of an asset, the date of the enhancement expenditure is not relevant for the purposes of taper relief. Taper relief is given on the whole gain by reference to the period since the asset was acquired, or since 6 April 1998 if later.

The amount of taper relief depends on the number of whole years in the qualifying holding period, ignoring fractions of a year.

Where a disposal takes place on the anniversary of the acquisition of the asset, it should be assumed that the year has been completed. If the asset is acquired on 29 February in a leap year, the anniversary date will be 1 March in following years, except leap years when it will be 29 February. No attempt should be made to determine the exact time of day of the acquisition and the disposal.

In practice taper relief will only be due where:

• a business asset, see CG17929+, was held for at least one whole year after 5 April 1998 (or where the bonus year is available see CG17901);

or

• a non-business asset was held for at least three whole years after 5 April 1998 (or two years where the bonus year is available, see CG17901).