I am giving some advice on a land exchange (essentially a plot owned jointly is being split into two equal portions).
S248B gives the ability to roll over the gain on the disposal of the old interest into the new holding. However, there are exclusions under S248C. My client intends to build a house to live in as his main residence on the new land interest.
Land becomes Excluded Land under 248C(1) if it is (para phrased):
– a dwelling house, and
– by virtue of any provision of S222 to S226 (private residences) the whole or any part of a gain accruing on a disposal of it by a landowner within 6 years of acquisition (of the new interest) would not be a chargeable gain.
– if land was not excluded land at acquisition but becomes excluded land within 6 years of acquisition, the amount of any chargeable gain accruing on the disposal of the relinquished interest shall be re-determined without relief given under S248B.
My question is: If the land becomes a private main residence for the land owner within 6 years is the gain automatically crystallised on the original disposal, or only if they dispose of the dwelling with the private residence reliefs?
The tax world explanatory notes to S248C refer to Land being Excluded “on a disposal at any time during the 6 years after acquisition….the whole or part of the gain is relieved under PPR provisions”. This seems to imply that there needs to be an actual disposal of the new interest, not just that a disposal (if it were to occur) would be wholly/partially relieved under PPR.