CGT Anti-Forestalling Measures – What you need to know

Now that the dust has settled on the 2024 Autumn Budget, it’s time to think about how some of the changes introduced might apply to transactions that at first glance didn’t look to be impacted by the announcements.

As touched on in our Autumn Budget 2024 commentary ‘Impact for Individuals’, there were a number of changes to capital gains tax (CGT) announced back in October and this article takes a closer look at the anti-forestalling measures introduced. These measures impact various scenarios so it's crucial that individuals and trustees understand how they might affect transactions they have been a party to (or will be a party to in future).

There are largely three categories of transactions affected by these rules:

If an unconditional contract was entered into to sell an asset before 30 October 2024 (Budget date), but the transaction was only completed after this date, the anti-forestalling rules could apply such that any gain is subject to CGT at 24 percent, rather than the 20 percent that was in force before the Budget announcements were made.

These rules apply to disposals with gains exceeding £100,000 and cover all asset types, including property, shares, and businesses. It is essential to carefully review the legal mechanism and timing of the transaction to determine if it falls under these provisions.

The provisions introduced are onerous and the exemptions only apply to transactions with no tax avoidance motive at all – a particularly high bar to meet, especially in the context of Autumn 2024 when many taxpayers were looking to understand how the upcoming Budget might impact their tax affairs.

If a share reorganisation or exchange was carried out between 6 April 2023 and 30 October 2024, and there is an intention to claim Business Asset Disposal Relief (BADR) or Investors' Relief on this reorganisation, the anti-forestalling rules could also have an impact.

Under the new legislation, the disposal date for CGT purposes will be the date the relevant BADR or Investors' Relief claim is made, and not the date of the reorganisation or exchange itself. This means if the claim is made after the Budget date, the disposal will be subject to the new, higher CGT rates.

As the CGT rate applicable to transactions qualifying for BADR will further increase in April 2025 and again in April 2026, ongoing anti-forestalling rules were introduced for transactions entered into during this period.

Broadly, these ongoing provisions mirror those mentioned above – so if an unconditional contract is entered into before either 6 April 2025 or 6 April 2026 respectively but is only completed after that date, then the default tax rate to be applied would be that in force at the time of completion, rather than exchange (which would have been expected in absence of these anti-forestalling provisions). Exemptions can apply in some scenarios where the transaction has no tax avoidance motive.

Care will need to be taken therefore where contracts are exchanging and completing on or around 6 April 2025 and/or 6 April 2026 to ensure the correct rate of tax is applied.

There are some exceptions to these rules. For example, they may not apply to transactions such as capital reduction demergers.

If you're unsure whether your transaction is affected by the CGT anti-forestalling rules, it's crucial to seek professional advice. Please contact the authors or a member of KPMG in the UK’s Family Office and Private Client team to help you navigate the complexities of these changes and ensure you comply with the new rules.

For further information please contact:

• Hannah Barraclough
• Tom Whybrow