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Introduction to this document

Exchange of joint interest relief claim

If you swap a joint interest in land or buildings to rationalise your ownership for no proceeds, you may be able to defer a capital gains tax charge.

Relief

Without any form of relief on any reallocation of interests, capital gains tax would arise in respect of the interest given up, with the consideration being the value of the interest obtained. It may be, however, that no cash actually changes hands.

HMRC introduced a relief in 1984 which was replaced for exchanges taking place on or after 6 April 2010 by s.248A to s.248E Taxation of Chargeable Gains Act 1992. The relief applies separately to each party to the exchange, who may choose to avail themselves of it or not. It simply has the effect that the base cost of the interest(s) that they acquire under the exchange is reduced by the amount of the gain(s) on the interest(s) that they have given up. It is effectively a variant of rollover relief.

Conditions

For the relief to be available a number of conditions are imposed under s.248A:

  • two or more people (including the claimant) jointly own two or more separate land interests
  • the claimant will:
    • dispose of their interest in one or more of those land interests
    • acquire one or more of the other land interests in consideration; and
    • (due to the exchange) become sole owner of the interests so acquired
  • the interest(s) disposed of by the claimant will be under the sole ownership of the transferee in consequence of the exchange; and
  • the interest(s) acquired by the claimant are not excluded interests.

Married spouses and civil partners are considered to be a single person for the purposes of these conditions if they are living together at the time of the exchange.

Procedure

You must claim relief under s.248A within four years of the end of the tax year you make the exchange in. Use our template letter to do this.