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Capital gains tax liability on agreement for landowners to pool their land.
My farming client is considering clubbing together with neighbouring landowners to make a site more attractive for residential development. An ‘equalisation’ agreement is being contemplated under which each disposing landowner will pay a share of the proceeds to the others based on the respective acreages contributed into the ‘pot’. The concern is that a double capital gains tax charge will result following the case of Burca v Parkinson.
In essence the ‘pay-aways’ are not deductible for the vendor under TCGA 1992 s 38 and the others have a capital gains tax liability on the crystallisation of a chose in action. This at least appears to be the strict position but is it a point that HMRC takes in practice?
Have any Taxation readers had experience of HMRC allowing a deduction for the ‘pay-aways’?
I am aware there are potential solutions to the problem (such as land pooling ...
