CGT Rebasing to March 1982: Selling Property Your Family Has Held for Decades

Every so often a family comes to us about selling land or a building that's been in the family since long before anyone currently involved was making the decisions. Farmland bought in the 1960s, a shop premises acquired by a grandparent, a site sitting inside a family investment company since before most of its current directors were born. The instinct is to ask what it originally cost. For Capital Gains Tax purposes, for most of these owners, that number no longer matters at all.

The rebasing rule in outline

Where an asset was held on 31 March 1982, TCGA 1992 section 35 rebases its base cost to the market value it had on that date, rather than what was actually paid for it, however long before that the purchase happened. The rule exists because 1982 was when the tax system moved to strip out purely inflationary gains, and the practical effect for a property held since well before then is that decades of pre-1982 appreciation, and the difficulty of ever properly evidencing a purchase price from that far back, simply drop out of the computation. Only growth in value from 31 March 1982 to the date of the eventual sale is what gets taxed.

For individuals, trustees and personal representatives: it's now compulsory

Since 6 April 2008, rebasing to the 31 March 1982 value has been the sole method available to individuals, trustees and personal representatives. Before that date, owners could run a "kink test", comparing the gain calculated on original cost against the gain calculated on the 1982 value and using whichever was more favourable. That comparison has been abolished for these taxpayers. The 1982 value is now used regardless of whether it happens to produce a better or worse result than the original cost would have, which in practice almost always favours the taxpayer given how far property values have moved since 1982, but it does mean the choice that used to exist is simply gone.

For companies, the position is more complicated

Company-held legacy property is a different story, and it's the one that catches out family investment companies and longstanding property-holding companies more often than individuals. Unless the company made a valid global rebasing election under the Finance Act 1988 rules, generally within a strict time limit running from its first relevant disposal after 5 April 1988, the kink test can still apply on each disposal today: a fresh comparison between the gain on original cost and the gain on the 1982 value, taking whichever is more favourable. Whether that election exists is a question of the company's own historic paperwork, often made by a director or adviser who's long since left the business, and it genuinely changes the computation. Indexation allowance also still applies for companies, calculated from whichever of cost or the 1982 value forms the base cost, and frozen using the December 2017 Retail Prices Index figure for any period of ownership after that date. None of this indexation or kink test machinery survives for individual owners.

Getting a defensible 1982 valuation

Rebasing only works as well as the valuation behind it, and producing a robust market value for 31 March 1982 more than four decades after the fact is a genuine piece of work, not a formality. It needs a RICS valuer working from whatever comparable evidence exists for that period, which for a rural site or a property that hasn't changed hands since can be genuinely thin. HMRC's Valuation Office Agency will look hard at a 1982 figure on any disposal of real significance, and it's worth submitting the proposed valuation for informal agreement using form CG34 before the return is filed, rather than finding out there's a dispute only after the sale has already completed and the numbers are fixed in everyone's mind.

Why this matters more as sites get developed

The stakes here tend to rise, not fall, the longer a family holds a site, because land bought decades ago as farmland or a modest commercial premises often sits at the edge of what's now a much more valuable development boundary. A 1982 valuation that reflects agricultural or low-intensity commercial use, rather than the hope value a site might carry today, is usually the right starting point in law, but it's also exactly the kind of figure HMRC will want tested carefully against comparable evidence before a large gain is agreed on the back of it.

Common questions

Do I still need to know what my family originally paid for a property bought before 1982?

Not for a Capital Gains Tax computation if you're an individual, trustee or personal representative. Rebasing to the property's market value on 31 March 1982 has been compulsory for those taxpayers since 6 April 2008, so only that 1982 value matters as the base cost, not the original purchase price. The historic cost can still be useful supporting evidence, but it isn't the figure the computation is built on.

Does my company still get a choice between original cost and the 1982 value?

Possibly. Unless the company made a valid global rebasing election under the Finance Act 1988 rules, each disposal of a pre-1982 asset can still be subject to the kink test, comparing the gain or loss computed on original cost against the gain or loss computed using the 31 March 1982 value, with the more favourable result generally applying. Whether that election was ever made, often decades ago by a predecessor director or adviser, needs to be checked in the company's records before relying on either figure.

How do I get a valuation for a property as it stood on 31 March 1982?

You need a retrospective valuation carried out by a RICS valuer with reference to comparable sales evidence from around that date, which for a property held over 40 years can mean genuinely limited data to work from. HMRC's Valuation Office Agency will scrutinise the figure on any disposal of significant value, and it's possible to submit a proposed valuation for informal agreement in advance using form CG34, which reduces the risk of a dispute arising only after the sale has completed.

Does indexation allowance still apply to property held since before 1982?

Only for companies. Indexation allowance was withdrawn for individuals, trustees and personal representatives years ago and replaced first by taper relief and then by the current flat CGT rate structure, so it plays no part in an individual's computation today. For companies it still applies, calculated from whichever of cost or the March 1982 value forms the base cost, but it has been frozen using the Retail Prices Index figure for December 2017 for any period of ownership after that date.

This article is general information, not personal tax or legal advice, and the rules referred to can change. Your own position depends on facts we cannot see from here — please take advice before acting on anything above.

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