My wife and I entered into an option agreement in respect of the sale of a plot of commercial land. The exercise of the option was dependent on the purchaser gaining planning consent for their development. The option was for 12 months with various clauses meaning it had a long stop date of up to 18 months. For granting this option we received a fee of £5k which was non refundable. The purchaser has gained planning consent and is going to exercise their option. My question is, how should the option fee be treated for tax purposes? Is it Capital Gains or Income. If, as I suspect it is the latter can I offset the legal fees in drafting and oversight of the option agreement? Also I have carried forward losses from previous years and will have losses from the current year, can I offset these against the 'income' of £5k. All these losses were accumulated by way of the insurance, upkeep and maintenance of the site, which was previously two industrial units that we rented out and then had demolished some four years ago, the accumulated losses arise from continued expenditure with no rental income to offset them.
Thank you in advance for any assistance in this matter.
Grumpy
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