Are you a member ?
Home > Tax Articles > Capital Taxes > Exchanges Of Joint Interests In Land: ESC D26
Exchanges Of Joint Interests In Land: ESC D26 Print E-mail
User Rating: / 3
Share on Facebook

Capital Tax Review by Matthew Hutton, MA, CTA (Fellow), AIIT, TEP

Matthew Hutton MA, CTA (fellow), AIIT, TEP author of Capital Tax Review, points out the applications and limitations of an Extra-Statutory Concession on Capital Gains Tax.


A relief along the lines of TCGA 1992 ss 247 and 248 (relief on compulsory acquisition of land) may be claimed to alleviate CGT which would otherwise arise where interests in land which is in the joint beneficial ownership of two or more persons are exchanged after 19 December 1984 and:

• either a holding of land is held jointly, and, as a result of the exchange, each joint owner becomes sole owner of part of the land formerly owned jointly; or

• a number of separate holdings of land are owned jointly, and, as a result of the exchange, each joint owner becomes sole owner of one or more holding.

Warning: ESC D26 precluded where main residence relief applies

Concession D26 does not apply where the interest in land acquired is or becomes the owner’s principal private residence (which corresponds to the restriction on roll-over given by concession in TGCA 1992 s 248, although the 6-year time limit is not necessary to repeat). However:

(a) the concession is extended to cases where joint owners are owners of houses which are their respective principal private residences, provided:

(i) as a result of the exchange each becomes the sole owner of their respective residence; and provided

(ii) the gain otherwise arising on a disposal immediately after the exchange would be wholly exempt; and provided

(iii) each owner agrees that the base cost of his residence is the original cost of the joint interest and that his sole interest was acquired at the time the joint interest was acquired.

(b) Note that condition (a)(ii) is applied strictly. It is often the case in family farming partnerships that a farmhouse is occupied by different family members at different times. When a move to rationalise a holding takes place, it may well be that each house qualifies for only partial private residence exemption. HMRC have confirmed that the extension of ESC D26 cannot operate in such cases. Furthermore, it would not operate where part of the premises had been used exclusively for business purposes. Note, in addition, that if the house is then occupied without the business part being so occupied exclusively, the concession cannot operate.

(c) Nonetheless, HMRC do admit that it is possible for a property to comprise separate residences for the purposes of the extended concession. Therefore if a house is jointly owned by A and B and, prior to an exchange of interests, A and B divide the property into two residences each occupied by them respectively, it is then possible to apply the extended concession – though, of course, each owner would have to establish that the whole house was his residence prior to the division (so that any subsequent gain after the exchange was wholly exempt).

(TACS Talk Autumn Countryside Taxation Conference October 2005, paper by Adrian Baird, Chief Taxation Adviser to the CLA)


The concession given under ESC D26 can be very useful, but the detail of D26 does need to be observed carefully. Generally of course an exchange of land now brings about a double charge to SDLT, under the provisions of FA 2003 s47. What is interesting is that many of the so-called ‘exchanges’ covered in ESC D26 are in fact partitions for SDLT purposes, when only any equality money falls into charge (FA 2003 Sch 4 para 6).

January 2006
Matthew Hutton

More Information

The above article has been taken from Matthew Hutton’s Capital Tax Review, a quarterly update for professional advisers of private clients. For more information, visit

About the Author

Matthew Hutton is a non-practising solicitor (admitted 1979), who has specialised in tax for over 25 years. Having run his own consultancy (latterly through Matthew Hutton Ltd) until 30th September 2000, he now devotes his professional time to writing and lecturing.


Tuesday 13 June
Cambridge Belfry Hotel

Tuesday 20 June
Sketchley Grange
Burbage, Hinckley

Tuesday 27 June
Norton Manor Hotel,
Sutton Scotney,
nr Winchester

Thursday 14 September
Bailbrook House, Bath

Tuesday 3 October
Weetwood Hall, Leeds

Tuesday 31 October
The Law Society’s Hall

For further details, brochures and booking forms please contact Matthew Hutton: email – This e-mail address is being protected from spambots. You need JavaScript enabled to view it or telephone – 01508 528388 (Ref: TaxationWeb).
Only registered users can write comments!

About The Author

Mark McLaughlin

Mark McLaughlin is TaxationWeb's Co-Founder, Director and Technical Editor. He is a Fellow of the Chartered Institute of Taxation and a member of the Association of Taxation Technicians and the Society of Trust and Estate Practitioners. He lectures on tax subjects, is co-author of Tottel's IHT Annual and Ray & McLaughlin's IHT Planning, and Editor of Tottel's Tax Planning and Annual series. Mark's work has also been published in Taxation, Tax Adviser, Tolley's Practical Tax, Tax Journal and Simon's Weekly Tax Intelligence.

Since January 1998, Mark has been a consultant in his own tax practice, Mark McLaughlin Associates, which provides tax consultancy and support services to professional firms. He publishes a regular 'Tax Update' e-Newsletter for clients and other professional firms. To receive future copies, contact Mark via his website.

Article Added Saturday, 25 March 2006 | 7288 Hits


Your attention is drawn to the disclaimer on this site, which applies to the content in this section. The content is based on tax legislation in operation at the time of publication, which may subsequently have changed. Whilst every care has been taken in its production, neither the author nor TaxationWeb Ltd. can accept responsibility for any action undertaken or refrained from as a consequence of this material.

Watch Now

"Why Accountants need an App"

Latest video from


Tax Books


HMRC Investigations Handbook 2014/15

HMRC Investigations Handbook 2014/15 (previously titled: Dealing with HMRC Investigations) will assist and support when you are representing clients under investigation.


Tax Planning for Family and Owner-Managed Companies 2014/15

This guide is designed to provide an invaluable source of money-saving advice for anyone who advises or runs a family or owner-managed company.
Tax Planning 2014/15

Tax Planning 2014/15 covers the many situations and tax planning opportunities that practitioners encounter everyday when dealing with their clients? tax affairs. This book is full of easily implementable technical suggestions and advice.
Tax Chamber Hearings: a User's Guide (3rd edition)

A clear, practical guide to the procedures involved when a taxpayer takes an appeal to the Tax Chamber at the First-tier Tribunal.
Employee Benefits & Expenses: 2-volume bundle

Clear, practical commentary on the taxation of employee benefits and expenses, across two volumes, with a discounted price when both books bought together.
Hitwise Award Winner Apr-Jun 2008 Hitwise Award Winner Jul-Sep 2008 Hitwise Award Winner Oct-Dec 2008 Hitwise Award Winner Jan-Jun 2009 Hitwise Award Winner Jul-Dec 2009 Hitwise Award Winner 2011 Alexa - Most popular news and media website

TaxationWeb Limited (Registered in England No. 4571386), 6 Coleby Avenue, Peel Hall, Manchester, M22 5HH, United Kingdom

By using this website, you agree to using cookies. Cookies are small text files stored on your browser when you use websites and applications (learn more about cookies).
You can control how websites use cookies by configuring the privacy settings within your browser (please refer to your browser help function to learn more about cookie controls).
Note that if you disable cookies entirely, there are parts of this website which may not function properly (e.g. logging in, commenting, etc).

Website by Dorifor Internet Marketing