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Gentleman's agreement

03 August 2006
Issue: 4069 / Categories: Forum & Feedback

My client sold a piece of land for £40,000 and received a cheque from the purchaser six months before any contract was drawn up. The payment was in the tax year before the contract was made.
I have it in mind that a contract for the sale of land must be put into writing and I presume that I should treat the disposal for capital gains tax purposes as being made in the later year, thereby deferring payment of the tax liability.
Is this approach correct and can readers explain the principles to enable me to justify this to HMRC?

My client sold a piece of land for £40 000 and received a cheque from the purchaser six months before any contract was drawn up. The payment was in the tax year before the contract was made.
I have it in mind that a contract for the sale of land must be put into writing and I presume that I should treat the disposal for capital gains tax purposes as being made in the later year thereby deferring payment of the tax liability.
Is this approach correct and can readers explain the principles to enable me to justify this to HMRC?
I look forward to Taxation readers' views and thoughts on this subject.
Query T16 855 – Jeeves.


Reply by Venta Belgarum:

Only for VAT purposes could the payment in advance be treated as of relevance: see VATA 1994 s 6(4). Although the factual...

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