CG17942 - Taper relief: business asset: derived from other asset: Taper relief does not apply to disposals before 6 April 1998 or after 6 April 2008

TCGA92/Sch A1/para 14 contains rules for taper relief where assets are derived from other assets.

In deciding whether the asset disposed of was a business asset at a time when another asset from which its value is derived was in the ownership of the person making the disposal, consideration should be given to both the use of the original asset and the derived asset during the whole relevant period of ownership falling after 5 April 1998.

- EXAMPLE

Lease of land acquired 8 January 1995.

Freehold of same land acquired 4 February 1999.

The lease is extinguished by merger with the freehold.

Disposal of freehold 3 May 2001.

The land was used for the taxpayer's trade from 8 January 1995 to 3 May 2001.

The value of the freehold is derived to some extent from the extinguished lease and so the qualifying holding period for taper relief begins on 6 April 1998. The asset is treated as having been held before 17 March 1998 and so the disposal qualifies for the bonus year. The relevant period of ownership is from 6 April 1998 to 3 May 2001 and the land was a business asset throughout that period.

Qualifying holding period = 3 whole years.