Claim for relief - loss on sale of land

I am preparing a claim following loss on sale of land. The property is in a retirement block and the terms of the lease allow the landlord to purchase the flat for 90% of the original purchase price. The terms also give the lessee the right to a share of the profit if the landlord subsequently sells the flat for more than the original purchase price.

Landlord has just completed the repurchase of the flat at 90%. However, until they sell it on, we don’t know whether there will be any profit to share.

Will HMRC accept a claim for relief at this stage or do we have to wait until the flat has been sold? The terms of the lease don’t set a time limit on the right to share in the profit.

Samir Hussain

I strongly suspect that HMRC would look to ascribe a current market value to the right to receive the future sum.

If so, HMRC would no doubt be able to access details of any recent transactions in the retirement block, or similar property locally, and include a discount to allow for when a sale might reasonably occur.

If you have not already done so, it will be worth liaising with the landlord to identify the price at which they will be marketing the property which, hopefully, will enable you to identify a “ballpark” figure for what the estate might expect to receive once a sale has been made.

For CGT purposes, HMRC may apply the decision in Marren v. Ingles (1980), deeming the right to receive the later sum a new asset arising out of the original disposal and being chargeable to CGT when it becomes due and payable.

Whilst you might consider assenting the future right to the beneficiaries, if the landlord’s sale might not occur in the relatively near future, if a CGT loss arises on the original sale to the landlord the beneficiaries may not have the benefit of this to offset any personal gains.

Paul Saunders