A capital gain when proceeds are not fully paid

A capital gain when the proceeds are not fully paid over time. How does this affect the CGT?

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A makes a disposal to B for £100,000.  It cost A nothing so the £100,000 is pure capital gain.  In year 1 A declares the £100,000 as a capital gain.  B agrees to pay for the item over five years at £20,000 a year.  In year 3, B defaults and says he can't pay any more.

Would their be a mechanism for A to gain a repayment of capital gains paid as he only received £40,000 for the item.

What would happen if B just handed the asset back to A?  

Replies (13)

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By Accountant A
04th Feb 2018 19:05

An accountant will be able to help you claim back any tax that is legally recoverable.

Assuming the asset is worth something then I would treat it as a further payment towards the original £100,000.

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By tonycourt
05th Feb 2018 15:08

A refund of CGT can be claimed if you can convince HMRC that the unpaid proceeds are irrecoverable - section 48 TCGA 1992.

If the buyer were to hand back the asset to the seller, and this wasn't envisaged as a possibility in the original contract, then the transaction cannot be linked to the original sale. It is a new transaction subject to the capital gains tax regime and any gain or loss must be calculated and reported. However, as Accountant A says, if the asset has value, A can, if he or she wishes, accept it as part settlement of the amount owing from the original sale.

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Replying to tonycourt:
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By Tax Dragon
06th Feb 2018 09:09

S48 is relevant if the amount taxable as proceeds is based on the amount received as consideration.

There are many provisions that treat the amount taxable as proceeds as some other figure and I would want much more info than the OP has provided before I concluded that s48 was in any way relevant.

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Replying to Tax Dragon:
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By tonycourt
06th Feb 2018 09:58

Not sure what you're saying - but it seems you might be conflating the two separate elements of my response. Perhaps you can explain what you mean more clearly.

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Replying to tonycourt:
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By Tax Dragon
06th Feb 2018 10:18

What I am suggesting is that there are other factors, about which we have been told nothing, which are relevant to the tax analysis and which render s48 irrelevant.

IMHO you are assuming a lot about the situation in order to conclude that s48 applies. In the absence of useful information, I prefer not to make those assumptions.

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Replying to Tax Dragon:
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By tonycourt
06th Feb 2018 10:48

Hmmm! I've assumed nothing. I answered the questions in keeping with the scant, but adequate information provided by the OP.

Of course there are other factors that could, might or perhaps come into play, but I haven't assumed any these and so haven't mentioned them in my answer. This is a forum for advice not a tax planning text book .

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Replying to tonycourt:
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By Tax Dragon
06th Feb 2018 11:47

The most you can say is that s48 may be relevant. Which is what I said.

My supposition is that the OP has not told us enough and s48 is in fact not relevant.

Your supposition (despite acknowledging that there are other factors that may be relevant) is that what we have been told is adequate and s48 applies.

The scantiness in the question demanded more caution in your first reply (it's your certainty I take issue with, not your answer per se).

[And I agree this is a forum for advice. It's also interactive. That means you can ask the OP for more info without having to make assumptions and suppositions.]

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Replying to Tax Dragon:
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By tonycourt
06th Feb 2018 12:49

"A refund of CGT can be claimed if you can convince HMRC that the unpaid proceeds are irrecoverable - section 48 TCGA 1992"

That's s.48 in a nutshell there's no uncertainty, because nothing is uncertain about that statement, nor the legislation. I'm not sure why you think there is.

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Replying to tonycourt:
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By Tax Dragon
06th Feb 2018 12:55

Quote:

....nothing is uncertain about that statement...


Exactly. With that in mind, reread my previous post.
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Replying to tonycourt:
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By Portia Nina Levin
06th Feb 2018 13:16

TC, TD is alluding to the possibility that A and B may be connected persons; where s 48 would then be an irrelevance. Given the quality of the OP it is not a situation that can be ruled out by reference to its omission alone.

"What would happen if B just handed the asset back?" Discuss the circumstances in which such a solution might be being contemplated.

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Replying to Portia Nina Levin:
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By Tax Dragon
06th Feb 2018 14:23

Insert an 'inter alia' somewhere and that's pretty much it.

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Replying to Tax Dragon:
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By Portia Nina Levin
06th Feb 2018 14:41

TC, TD, inter alia, is alluding to the possibility that A and B may be connected persons; where s 48 would then be an irrelevance. Given the quality of the OP it is not a situation that can be ruled out by reference to its omission alone.

"What would happen if B just handed the asset back?" Discuss the circumstances in which such a solution might be being contemplated.

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Replying to Portia Nina Levin:
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By Tax Dragon
06th Feb 2018 14:47

Yup, that's pretty much it.

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