Costs of 1st sale deducted from 2nd sale

Costs of 1st sale deducted from 2nd sale

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Seller been marketting his unincorporated business through selling agent for several years. Buyer comes forward. And backs out of signing contract but before completion. Seller incurs 5-figure sum legal+selling agent fees. Buyer has no assets so seller can't recover any costs from buyer. Agent agrees not to charge if 2nd sale occurs within 12 months. Second buyer comes forward within 12 months. This time sale goes through ok. Legal fees now "only" 4-figure. When calculating CGT, is seller permitted to claim relief on costs of 1st sale? If 1st sale had not occured then agent would have charged commission on 2nd sale. Also, a lot of work done by the solicitor on the 1st sale was also relevant on the 2nd sale thus the reduction in costs. I've read through CG15250+ but can't find anything relevant. Anyone got any thoughts?

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By tonycourt
11th Sep 2012 16:32

Some and some

My immediate thought was no. But after deliberation my thoughts are that some of the costs may be deductible as incidental expenses (s38 TCGA).

Costs like the agent’s original finders fee and time negotiating with the first buyer would not be deductible. But for example the cost of valuing the business would be valid for the second purchase and so deductible. And to the extent some of the original legal work was used for the second sale a proportion of this too could be deducted. There's no "wholly and exclusively" equivalent for CGT to stop apportionment. 

 

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