Capital Gains and Forward Contract

by **DonkeyAccountant** on Tue Dec 06, 2011 5:36 pm

Mr A bought a legally binding "contract" for £250,000 to buy a property at a specified date in the future for £750,000. However, Mr A never paid £750,000 for the property and the property developer, for some reason, decided not to pursue him for the £750,000.

The "contract" was actually listed for sales by the estate agent and so it did have market value.

Can you see how Mr A can claim capital loss on the £250,000? As far as I'm aware, there was no disposal and therefore no capital loss. Is it possible to treat it as miscellaneous loss (Loss on derivative instrument for non-trading individual) on his self assessment tax return (he's got miscellaneous income in the same tax year) (I can't see it's a revenue loss either)?

by **section 44** on Tue Dec 06, 2011 5:40 pm

DonkeyAccountant wrote:The "contract" was actually listed for sales by the estate agent and so it did have market value.

What does this mean? Also, is there actually a contract (hence, why the " ")?

by **DonkeyAccountant** on Tue Dec 06, 2011 5:57 pm

The "contract" is definitely a legally binding contract. (Just ignore " ").

Apparently, Mr A did not purchase the flat because the property developer did not perform his side of the contract. The developer did not get a proper planning permission for the building work and did not secure all the legal documents required. In other words, it's not Mr A's fault.

by **section 44** on Tue Dec 06, 2011 6:07 pm

A contract for an acquisition of land which is capable of specific performance gives rise to a beneficial interest in land. What (if anything) happened to the contract?

by **mullet** on Tue Dec 06, 2011 6:21 pm

A forfeited deposit does not give rise to an allowable capital loss. See CG12390 and CG12340.
http://www.hmrc.gov.uk/manuals/cgmanual/cg12390.htm
http://www.hmrc.gov.uk/manuals/cgmanual/CG12340.htm

by **section 44** on Tue Dec 06, 2011 6:28 pm

Presumably s22 being the authority, as per:

http://www.taxationweb.co.uk/forum/capital-gains-and-deposit-t36782.html

by **DonkeyAccountant** on Tue Dec 06, 2011 6:43 pm

I have a feeling the £250,000 was not a deposit. It was the purchase price of the contract to purchase the property at a date in the future for £750,000. In other words, it was the value of the contract itself. I don't think it was meant to be refundable whatever happened to the contract.

by **mullet** on Tue Dec 06, 2011 7:20 pm

Is this essentially the same query as this one from a few days ago? It appears to be.
http://www.taxationweb.co.uk/forum/capital-gains-and-deposit-t36782.html

It was the purchase price of the contract to purchase the property at a date in the future for £750,000.

What does the "contract" (your inverted commas) actually say?

by **Incredulum** on Tue Dec 13, 2011 6:18 pm

DonkeyAccountant wrote:I have a feeling the £250,000 was not a deposit. It was the purchase price of the contract to purchase the property at a date in the future for £750,000. In other words, it was the value of the contract itself. I don't think it was meant to be refundable whatever happened to the contract.

A feeling is no good. You should go back to the contract. Does Mr A stand in the shoes of his vendor? Is there a sub-sale? Is there a second contract, or what?

by **Incredulum** on Tue Dec 13, 2011 7:29 pm

[quote="DonkeyAccountant":3ty3zuuh]I have a feeling the £250,000 was not a deposit. It was the purchase price of the contract to purchase the property at a date in the future for £750,000. In other words, it was the value of the contract itself. I don't think it was meant to be refundable whatever happened to the contract.[/quote:3ty3zuuh]

A feeling is no good! You should go back to the contract(s). Does Mr A stand in the shoes of his vendor? Is there a sub-sale? Is there a second contract, or what? (I am no land lawyer.)

I know you're dying to be told that a negligible value claim can be made in respect of a contract that was purchased.