598A Relief on dissolution of farming partnerships

Summary

This section grants relief from capital gains tax to farming partnerships on the dissolution of such partnerships. The asset being disposed of must have been owned and used by the farming partnership for the period of 10 years prior to the dissolution of the partnership. Where one of the partners has acquired a share of the partnership by way of inheritance, the period of ownership and use of the asset will run from the date that the donor originally entered the partnership. The section provides that a gain will not be treated as accruing in respect of a partnership asset and also that the asset will be treated as having been acquired at the same time and for the same consideration as it was originally acquired by the partner who disposed of that asset. The relief will not apply if the asset formed part of the trading stock of the trade carried on by the farming partnership or of a trade carried on by the partner acquiring the asset.

The section applies to disposals made on or after 13 March 2008 and will cease on 31 December 2013.

Details

Definitions

(1) “farming” and “trade” have the same meanings as in the Income Tax Acts.

“farming partnership” means a partnership comprised of individuals which carries on or has carried on the trade of farming.

“relevant asset” means an asset which is jointly owned by the partners in a farming partnership.

“relevant disposal” means a disposal which arises on the partition of a relevant asset.

Application of section

(2) The section applies where a relevant asset has been owned and used for the purposes of farming by a farming partnership for a period of at least 10 years before the relevant disposal took place.

Commencement of period of ownership where partnership asset acquired by inheritance

(3) Notwithstanding subsection (2), where one of the partners acquired his or her share of the relevant asset by way of inheritance, the period of ownership and use of the asset will be deemed to have commenced on the date that the person entered into partnership with the other partner or partners in the farming partnership.

Treatment of gain arising on disposal of a relevant asset

(4) A gain will not be treated as accruing in respect of a disposal of a relevant asset. In addition, that asset will be treated as having been acquired at the same time and for the same consideration as it was originally acquired by the partner disposing of that asset.

Relief disallowed for trading stock

(5) The relief provided for in subsection (4) will not apply if the asset disposed of formed part of the trading stock of the trade carried on by the farming partnership or of a trade carried on by the partner acquiring the asset.

Relevant Date: Finance Act 2021