Q&A: tax relief and forfeited deposits on property purchase

In this week’s Q&A, Croner-i tax adviser Kabita Tank, examines whether tax relief is available when a property purchase falls through and the deposit is lost

My client, a trading company put a deposit on a property intended to be its new premises. However, they had to pull out before it completed. How do we treat the deposit and associated costs for tax purposes?

The costs are clearly capital in nature, but no asset has been acquired and so there is no disposal of an asset that may create a capital loss.

Section 144(7) Taxation on Chargeable Gains Act 1992 (TCGA 1992) applies to a forfeited deposit of purchase money and consequently such a loss is not treated as the disposal of an asset.

Your free features:

Breaking news and expert analysis
Customisable daily newsletters
Six free CPD learning modules each year
Personalised CPD tracker
Top 75 Firms league tables
Regulatory changes
Hardman’s Tax Data

Tax | Property 118 wins case against HMRC over notifiable scheme notices

Tax | Prediction markets and tax: what accountants need to know

Tax | Q&A: rollover relief on property gain

Tax | Business property relief changes: tax and succession planning

Tax | Top tips: year end tax planning for owner managed businesses

Navigate

Tax Services

Your free features:

Sign up to Business & Accountancy Daily