Is there CGT on compensation?

Is there CGT on compensation?

Didn't find your answer?

A husband and wife paid a deposit for a new build property in Bucharest but it fell behind schedule and they exercised a get out clause to have the money refunded plus penalties. They received back £25k more than they paid. Is this chargeable under CGT?

I am thinking it may not be taxable, as the property was never completed it was never owned therefore no capital asset to charge but am not sure.

Would appreciate members views.

Replies (3)

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By George Attazder
09th Jan 2013 10:53

What you have...

... is a chose in action, which is an asset, and the penalties would be a capital sum derived from that asset.  See S.22 TCGA 1992.  Ss. 23, 26(1) and 51 don't help you.

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By Southbankdelboy
09th Jan 2013 16:12

Compensation paid on building delay

Thanks George, most useful.

In the first link it says "The usual test is whether the underline asset itself is affected. In Zim Properties, the value of the land was unaffected"

In our client's case the value of the land may well have been affected since the client pulled out because of the builders delay in actually building the property which would have affected the value of land it was to be built on. I wonder if this changes anything?

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By George Attazder
09th Jan 2013 16:25

The test...

... is simply to determine whether the compensation is a capital sum derived from the chose in action, or the underlying asset (which was rejected in Zim).  in your case I don't think there is an underlying asset.

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