Gain/loss on reposession with moneys kept

Getting lost

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I don't have nitty gritty detail on this yet, but pointers where to look would be handy.

Sale of shares takes place, with consideration agreed by instalments. Assume that CG declared and ER claimed in the year of disposal.

Purchaser defaults on payment, and so shares are repossessed by seller. No monies are returned, and so the original seller is better off by the value of the payments made plus any increase in the value of the shares.

Assume that we are talking about substantial sums. CG and income tax position for the seller (including ER/withdrawal etc)?

I haven't seen the SPA, and so don't know what conditions regarding final ownership were etc. i.e. Whether or not there was a clause that only transferred ownership on the final payment. Assume straightforward contract for the moment.

Replies (10)

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By bernard michael
17th May 2017 10:08

You do need to see the SPA because that'll dictate how you treat the current outcome

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By SteveHa
17th May 2017 10:12

I know. The question has been asked quite of the record to our CEO, who has put the question to me. The chances of actually seeing the SPA are remote. At best, I may be able to glean some details.

However, if I could identify relevant legislation to be able to respond with an overview of likely outcomes, that should be enough to potentially secure the work.

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Replying to SteveHa:
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By Tax Dragon
18th May 2017 08:33

SteLacca wrote:

The chances of actually seeing the SPA are remote.


This is your client and they cannot provide live documents that they must have had? You should consider whether you want to (or indeed should) continue to act.
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Replying to Tax Dragon:
By SteveHa
18th May 2017 08:46

No, it's not. It's a mate of the boss.

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Replying to SteveHa:
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By Tax Dragon
18th May 2017 10:48

It's your boss's decision, but... as you have said that substantial sums are involved, I'd suggest avoiding providing any advice without the protection of a contract. Plus that provides the bonus of getting paid for the work.

And (win win win) it means you will find out the facts that will enable you to advise, rather than making it up in a vacuum.

Best for you, best for your boss and best for his/her mate. Win win win squared.

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Replying to Tax Dragon:
By SteveHa
18th May 2017 10:54

I do agree, believe me. I'm hoping that it was one of those "In the pub" questions that doesn't come back, though I find I have an academic interest, too, which is why I've continued to pursue.

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By bernard michael
17th May 2017 10:27

Why is no money returned ? Again is the answer in the SPA?
Tell the CEO that without full facts you can only give him incorrect answers.
A good CEO will respect that

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By SteveHa
17th May 2017 10:36

You are, of course, correct, and this was my position whilst discussing with a colleague (that we need to see the SPA).

Let's see if the question comes back, or if it was one of those "bumped into my mate in the pub" type questions.

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By Montrose
17th May 2017 18:08

The sale took place. The purchasers owed the consideration and pledged the shares as collateral security?

The failure to pay the vendor does not affect the tax treatment of the sale.You could well have a CGT liabilty greater than the cash received- I can't see any immediate relief for this, although if ER was available on the original sale that may be academic

The acquisition of the shares on failure to pay is a new transaction for CGT, the purchase price being the unpaid consideration. Whether in due course ER would be available on a later sale is a separate question

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By SteveHa
18th May 2017 08:48

Found some clues in TCGA s.48 and ESC D18.

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