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Interpretation of TCGA S242 (Small Part Disposals)

Does "transfer of land" exclude certain small disposals re land where no transfer of land occurs?

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Let me illustrate the problem with a theoretical example.

Farmer has acres of farmland which cost £1million. He allows a builder access to his land so that builder can build on an adjacent site.

Builder makes such a mess of a field that builder agrees to pay £10,000 compensation to farmer for the damage. Farmer would like to deduct the £10,000 from the £1million cost of the land for CGT purposes utilising TCGA 1992 s242.

TCGA 1992 s242 is concerned with small part disposals of land. But the section starts with "This section applies to a transfer of land......"

Now in this illustration there has not been any transfer of land, just compensation for damage to land.

Do I assume in this case that s242 cannot be used because there has been no "transfer of land". This would then presumably mean applying A/A+B to the £1million cost of the land.

 

 

 

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By LyneT
16th Jan 2019 16:02

If there is no disposal, there cannot be a part disposal.
Farmer has not disposed of any of his land. It has just become less valuable because of the builder's action. So it is compensation, rather than a disposal.
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim40100

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By CTA
16th Jan 2019 16:13

S.23 may help you in this scenario...

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By Tax Dragon
16th Jan 2019 17:24

Are you sure the compensation is for damage to the land, not for, say, loss of earnings?

But as a theoretical question, I love it. As you rightly say, s242 refers to a "transfer" whilst Ss21, 22, 23 etc refer to "disposals".

I can't see anything statutory to say that these terms are synonymous. But I can't see HMRC making the subtle distinction you have (you're just too good!) Have a look at CG71870 and draw some comfort.

But do first check that the compensation is what you think it is.

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