It is not very often we are left ‘stumped’ but a recent discussion with a client did exactly that.
The client owns an investment property that is now the subject of a Compulsory Purchase Order (CPO). The property has been let for many years as a buy-to-let investment but equally the same would apply to an additional (2nd home) not used for buy-to-let or furnished holiday let purposes.
When you sell a residential investment property, you are usually subject to capital gains tax on the sale, payable within 60 days of the sale.
What about when it is a forced sale under a Compulsory Purchase Order e.g., to knock it down and build apartments or other infrastructure projects such as roads, railways, motorways etc? Clearly, you may not want to sell the property and then be forced to pay capital gains tax if there is a taxable gain.
Rollover Relief
For the sale of business assets and land or furnished holidays lets (currently classed as a business asset), HMRC allows rollover relief.
HMRC Concession on Compulsory Purchase Orders
HMRC recognises that a forced sale via a CPO on a residential let property creating a capital gains liability when you may not want to sell is unfair.
Read HMRC's CGT Manual