IR30

9 March 1999

CAPITAL GAINS: ABUSE OF CONCESSIONS

It will no longer be possible to avoid tax on capital gains by
abusing the terms of certain published concessions, announced the
Chancellor today.

Legislation will be introduced to protect revenue by ensuring that,
from today, tax will be paid on capital gains which are deferred due
to a concession. The Chancellor's action today is part of the
Government's commitment to stamping out tax avoidance and ensuring a
fairer tax system.

DETAILS

1. A number of published capital gains concessions allow gains to be
deferred from one year to another. It has recently emerged that
current legislation gives no protection against taxpayers who abuse
the terms of those concessions by not returning the deferred gain.

2. The type of capital gains concessions to which the new legislation
will apply are those which allow roll-over relief, or a similar
deferral-type relief, including any relief which treats a disposal of
a chargeable asset as giving rise to neither a loss nor a gain. All
these reliefs allow the gain not to be charged at the time of the
disposal on the basis that the gain will be brought back into charge
on the occasion of a subsequent event. The gain may then either be
charged on the same taxpayer who received the benefit of the relief
or another taxpayer to whom the asset has been passed in the meantime
by way of a further relief.

3. Legislation will be introduced so that the person upon whom the
deferred gain falls will be liable to a capital gains charge if that
person fails to return the liability arising as a consequence of the
concession. The charge will be based on the relieved statutory
liability of the earlier year. It will apply to gains arising on or
after today as a consequence of any concession published before
today.

NOTES FOR EDITORS

1. This measure is to protect revenue. It will ensure that taxpayers
fulfil their obligations to return gains which have been deferred by
way of a published concession.

2. The concessions with which this measure is concerned are those
which allow, by one means or another, capital gains to be deferred
from one year to another. The roll-over relief concessions, for
example, provide for gains on qualifying business assets to be
deferred in certain circumstances if the proceeds are reinvested in
further qualifying business assets. These concessions allow gains to
be rolled-over into the acquisition costs of new assets, so that
larger gains arise when the new assets are sold. Other means of
deferring capital gains may be employed in other concessions.

3. A concession is a relaxation which gives taxpayers a reduction in
tax liability to which they would not be entitled under the strict
letter of the law. The legislation will apply to concessions which
are published in any form and which are available generally to any
person falling within their terms. Most concessions are published as
Extra Statutory Concessions which are set out in Inland Revenue
booklet IR1. Certain Statements of Practice may also contain minor
concessionary elements.

INLAND REVENUE PRESS OFFICE
Media enquiries to:      0171 438 6692/6706/7327
(Out of hours: 0860 359544)

Non-media enquiries to:  0171 438 6420/6425
(Office hours only)

Inland Revenue information is on the Internet
www.inlandrevenue.gov.uk

# = pounds sterling