Exchange of joint interest relief claim

If you swap a joint interest in land or buildings to rationalise your ownership you may be able to defer any capital gains tax that might have been chargeable as a result of the transaction.

Relief

Without special relief a change of ownership of an asset is a chargeable transaction for capital gains tax (CGT) purposes, including where you swap one asset for another even if no payment is involved.

S.248A to s.248E Taxation of Chargeable Gains Act 1992 provides that CGT relief applies to each party to the exchange, should they decide to claim it. This has the effect that the cost of the asset they acquire for CGT purposes is reduced by the amount of the gain if any resulted from the asset they transferred.

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.