First-Tier Tribunal (TC01529):
The facts of the case were that a father had gifted three flats, that he owned in the UK, to his daughter on 2 December 2002. CGT liability arising on these transfers was not paid by the father before his unexpected death on 22 June 2003. Following an enquiry HMRC amended the father’s tax return for the year 2002-03 on 25 July 2007. Whilst the CGT liability arising out of the transfer of the flats was agreed with the deceased’s personal representative (his son), the CGT remained unpaid. Therefore, on 18 August 2009 HMRC issued the donee (the daughter) a Notice of Assessment, also dated 18 August 2009 under s 282 TCGA FOR YEAR 2002-03 ENDING 5 APRIL 2003. In addition HMRC sought interest calculated on the basis that it should have been paid by 31 January 2004 (s.59B Taxes Management Act 1970 (TMA).
The daughter was unaware that a CGT liability arose on her father’s estate and that it remained unpaid, until she received the s 282 TCGA assessment
S.282 TCGA provides that (1) If in any year of assessment a chargeable gain accrues to any person on the disposal of an asset by way of gift and any amount of capital gains tax assessed on that person for that year of assessment is not paid within 12 months from the date when the tax becomes payable, the donee may, by an assessment made not later than 2 years from the date when the tax became payable, be assessed and charged (in the name of the donor) to capital gains tax on an amount not exceeding the amount of the chargeable gain so accruing, and not exceeding the grossed up amount of that capital gains tax unpaid at the time when he is so assessed, grossing up at the marginal rate of tax, that is to say, taking capital gains tax on a chargeable gain at the amount which would not have been chargeable but for that chargeable gain.(2) A person paying any amount of tax in pursuance of this section shall be entitled to recover a sum of that amount from the donor. (3) References in this section to a donor include, in the case of an individual who has died, references to his personal representatives.
The appellant submitted that the assessment under s 282 TCGA should be for 2009-10, the year it was issued and not 2002-03 when the transfer of the legal title to the flats to the daughter took place. This would mean that the daughter would only be charged interest for her own default and not that of her father and his estate.
HMRC contended that s 282 TCGA is not a provision for bringing into charge CGT following the disposal of an asset but an alternative means of recovering a tax liability that has already become final and conclusive.
Whilst the tribunal concluded that a CGT liability did arise on the father and his estate as a result of the gift (disposal) and that the consequential CGT liability remained unpaid for 12 months from the date when the tax became payable, the assessment should apply only from the date, and therefore for the year, in which it was made i.e. 2009-10. It felt that the assessment made under s 282 TCGA on the donee, although derived from the assessment on the donor, is a distinct and different assessment from that on the donor and s 282 TCGA does not specify the year for which the assessment on the donee should be made. Therefore, any charge to interest on the unpaid CGT, against which there is no statutory right of appeal, could only be made from the date and in the year the assessment was made.
