Entitlement to losses on property dealings

The taxpayer’s son and daughter-in-law contracted to buy two plots of land allegedly on his behalf. However they were unable to complete because they could not obtain a mortgage so their deposits were forfeited. The taxpayer claimed that because the plots had been acquired on trust for him he had been trading in property so the lost deposits were allowable losses.

HMRC said there was no evidence the taxpayer was involved with the property purchases so he had not incurred any losses when they were aborted. It amended his tax return and imposed a penalty for the inaccuracy.

The First-tier Tribunal accepted that it had been the taxpayer’s intention to buy the properties off plan and to resell them on completion. However there was no  documentation to support his contention that the two plots were intended to be held by his son and daughter-in-law on trust...