Deemed negligible loss of an asset

Deemed negligible loss of an asset

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Please enlighten me of the deemed negligible loss of an asset.

Friend of mine has paid  80% of value of studio apartment in Dubai which was supposed to be completed in July 2010. It has not been materialized yet and not going to complete in near future . He has been to Dubai recently and there is only bare structure of building with no signs of completion etc.Current value of the flat has gone down to nothing i.e. it has lost its value by more than 70%.

He bought this in 2006 off plan and so far had paid 80 % of purchased price which equates to £72000.00

My question is, should we claim this deemed negligible value asset against CGT of another property. This property has been used for a partnership business. They are 4 doctors and equally share the profit for the last 4 years. But in 2010 they had taken another new partner into the practice and sold his share of the property to the new doctor. From this sale, there is a CGT of £7200.

Can he offset the loss from the Dubai property against this CGT?

I would be very much thankful to you all.

Replies (4)

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By noradh
09th Jan 2012 07:43

More info, please!

Is the apartment leasehold? If so, how many years does the lease run for?

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Replying to Kitkline:
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By Emthi
09th Jan 2012 13:41

Thank you for the response

It is a freehold property

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By LyneT
09th Jan 2012 16:26

not sure that the value is negligable

Are you sure that the value is indeed negligable?  Appreciate it must be somewhat annoying for client when he has paid for an asset that he is unalbe to use, but given that the builders do not appear to have folded, then is there not some value (albeit much less than what was paid for it) in the building.  He may be able to sell his interest in it for much less than he paid for it, thereby crystallising an actual loss, but I am not sure whether HMRC will accept that it has a nil or negligable value.

Hopefully I am wrong here and they will accept this, in which case, yes it is possible to make a negligable value claim under TCGA 1992 s24(92)

 

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By Emthi
09th Jan 2012 22:25

Thanks

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