Main residence sold several years ago, but some land, subject to a restictive covenant, was retained.
An opportunity has arisen to sell the land and the holder of the covenant has agreed to remove the restriction, in return for a lump sum.
I have read and reread S38(1)(b) but am struggling to convince myself that the expenditure creates "an identifiable change for the better in the state or nature of the asset", following Lord Emslie's comments in Aberdeen Construction Group Ltd v CIR, (52TC281), as outlined at CG15180).
Does anyone have any insight?
Thank you.
Replies (6)
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I'd say not being bound by a restrictive covenant was 'an identifiable change for the better in the state or nature of the asset'. You don't say what sort of restriction it was but if value was given to lift it, it was presumably considered detrimental so lifting it would be a change for the better and it is now a piece of land not subject to that restriction whereas it was so subject before and, therefore, the state/nature of the asset has changed.
It's possible that the nature of the restriction is important. The 2017 Blackwell case rehearsed some of the issues - albeit there the asset was shares and the restriction found to be personal to the owner (not a state of being of the shares themselves).
An analogy might be the obtaining of planning consent. Nothing has physically changed, but I doubt many would question that it enhances the land (within the meaning of TCGA).