Deferring the property gain

Produced by Tolley
  • (Updated for Budget 2021)
Deferring the property gain

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Deferring the property gain
  • Categorising the gain
  • Non-business assets
  • Business assets
  • Deferral reliefs for non-business assets
  • EIS reinvestment relief
  • Social enterprises hold-over relief
  • Hold-over relief
  • Deferral reliefs for business assets
  • Rollover relief
  • More...

There are various capital gains tax reliefs which an individual can utilise to defer the capital gain on a property disposal until a later time, thereby postponing the tax bill. These are discussed below.

Categorising the gain

The first step in deciding what deferral reliefs may be appropriate to the taxpayer’s situation is to decide whether the gain is a business asset or a non-business asset. Where the taxpayer disposes of a business asset, a wider variety of reliefs are available.

Non-business assets

A property business is often not considered to be a trade as the properties are held for investment purposes. If the property business were a trade, the sale of property would be a sale of stock and would therefore be chargeable to income tax. Whether the letting of property can amount to a trade is a question of fact.

This is discussed in the Transactions in UK land ― individuals and Application of the badges of trade guidance notes.

On this basis, the sale of a property used for the purposes of letting is normally classed as a non-business asset.

Note that if the property has been used as the individual’s only or main residence at any point during the period of ownership, principal private residence (PPR) relief may be available to exempt all or part of the gain. See the Principal private residence relief ― basic principles guidance note.

Business assets

As far as land is concerned, generally the following can be considered to be business assets:

  1. an interest in an asset used in the trade of the individual, or

  2. an interest in an asset used in the trade of the individual’s personal company

However, you need to look at the conditions for each relief carefully to ensure these are met.

Therefore, if the property concerned is owned by the individual but used by a company in which they own at least 5% of the voting rights, usually the property will be a business asset.

Having said that let property is

Popular documents