What adjustments can be made under Schedule 5BB paragraph 7 of the Taxation of Chargeable Gains Act 1992?

Paragraph 7 allows all necessary capital gains tax adjustments to be made when re-investment relief is granted or withdrawn under Schedule 5BB. These adjustments include raising new assessments, amending existing ones, or arranging discharges or repayments of tax. Crucially, these adjustments can be made even if normal statutory time limits for amending assessments have expired.

How is interest on overdue tax calculated when re-investment relief is withdrawn under Schedule 5BB?

When an assessment is raised to withdraw re-investment relief under Schedule 5BB, interest on overdue tax runs from 31 January following the tax year in which the assessment is made. This replaces the normal interest start date under section 86 of the Taxes Management Act 1970, recognising that the liability may crystallise well after the original disposal.

Can HMRC raise an assessment under Schedule 5BB after normal time limits have expired?

Yes. Paragraph 7 explicitly overrides the normal statutory time limits for amending or making capital gains tax assessments. This means HMRC can raise an assessment to recover capital gains tax following the withdrawal of re-investment relief even if the time limit for the original year of assessment has passed.

Why does paragraph 7 apply a special interest date instead of the normal due date?

The special interest date exists because the capital gains tax liability may only crystallise years after the original disposal when a chargeable event triggers withdrawal of relief. Charging interest from 31 January following the assessment year, rather than the original due date, ensures a fair and practical starting point for the taxpayer.

Taxation of Chargeable Gains Act 1992 Schedule 5BB paragraph 7

Adjustment of capital gains tax liability

Paragraph 7 deals with how capital gains tax liabilities are adjusted when re-investment relief is granted or withdrawn under this Schedule, and how interest on overdue tax is calculated in such cases.

All necessary capital gains tax adjustments must be made to reflect relief obtained or gains arising under the Schedule, whether by way of assessment, discharge, or repayment of tax.
These adjustments override the normal time limits that would otherwise apply to amending or making capital gains tax assessments.
Where an assessment is raised to withdraw re-investment relief, interest on overdue tax runs from 31 January following the tax year in which the assessment is made.
The special interest date replaces the date that would normally apply under section 86 of the Taxes Management Act 1970.

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