I'm wondering why the date of the Capital Gain is deemed to be on exchange of contracts, and not on completion.
House left to family in will, and it will be sold with a capital gain.
Contracts were exchanged in Feb 07, on the condition that planning permission gets granted. This still has not happened and so the family still own the asset.
The solicitor has said CGT is due for 0607.
I've tried looking this up, but with no success, so my question is: Why?
It's now June, and planning persmission is still going through. For all we know it could drag out til next year (though I sincerely hope not!) - yet we'd have to pay the CGT before realising the capital?
If someone could shed some light, I'd be grateful :o)
Jenni
Jenni Frost
Replies (5)
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Tony is right
Point your solicitor to TCGA s28(2).
The obtaining of planning consent is a contingent condition precedent to performance, in which no party to the contract is bound unless and until a specified event occurs -i.e. the planning consent
I am not sure if I agree with the solicitor
Contracts were exchanged in February, but only on condition that planning permission is obtained. Therefore, there is no legally enforceable contract to complete if planning permission is denied for any reason.
On this basis, no sale has been made. Therefore CGT will not be due for 06/07.
CGT
Thanks folks, that's somevery useful responses.
I'll forward this info on and see what comes up.
Jenni :o)
There are different types of condition ...
... that might apply to a contract:
Conditions precedent (to performance) and
Conditions subsequent (to performance)
Each type may be subdivided into contingent and promissory subclasses.
As you point out, a contract becomes chargeable to CGT when it becomes "unconditional" (s.28(2) TCGA 1992). However some categories of conditions are ineffective for this purpose ((Eastham (HMIT) v Leigh London and Provincial Properties Ltd [1971] Ch 871; Lyon (HMIT) v Pettigrew [1985] BTC 168)
A "contingent condition precedent" is however effective in deferring the date when CGT becomes chargeable, and the requirement for the granting of planning permission is an example of this.
So I would say that the solicitor is incorrect in this case, on the the facts stated. But I would suggest that you get it checked out properly.
conditional sale
I agree with the others. There is no sale when a condition has to be fulfilled. Regretably solicitors in my experience are often not very knowledgable about CGT.