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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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General: Definitions: Sale and time of sale

CAA01/S572 & S573

The sale of property includes:

  • the exchange of property, and
  • the surrender of a leasehold interest for valuable consideration.

 

Where there is an exchange of property or the surrender of a leasehold interest for valuable consideration, net proceeds of sale and sale price include:

  • the consideration for the exchange, and
  • the consideration for surrender.

 

The transfer of the relevant interest other than by way of a sale is treated for the purposes of CAA01 Parts 3 (IBA), 4 (ABA) and 10 (ATA) as if it were a sale.

The time of sale is the earlier of:

  • the time of completion, and
  • the time when possession is given.

 

For example, if completion is on 15 June but possession is not given until 1 July, the time of sale is 15 June. This definition does not apply for research and development allowance.

The net proceeds of sale are what the seller receives. They are not what the seller is entitled to receive but is unable to receive. If any part of the agreed sale price ultimately turns out to be irrecoverable ignore it.

This is the Solicitor’s advice. “In the case of Tyser v. A-G (1938) 1 Ch 426, the court had to consider the meaning of “proceeds of sale” in the context of the Estate Duty works of art provision in FA30/S40 (2). That section, unlike CAA01/S61, contained no reference to “net”, nor did it refer to “proceeds received by the person required to bring the disposal value into account”. Even without such references the Judge held that the meaning was “ the proceeds of sale which reached the vendor or any person on his behalf and for his use after payment of the proper expenses of sale”. The whole basis of the reasoning is that the phrase must refer to what the vendor receives and has use of.”

If the seller receives part of the sale price and then disposes of his right to receive the balance the amount he receives for the right to receive the balance is part of the net proceeds of sale.

Example Robbie sells a computer to Lawrence for £20,000, payable in two equal instalments. After Robbie has received the first instalment he assigns the right to receive the second instalment to Garth for £8,000. Robbie’s sale proceeds are £18,000.

Only expenses that can be regarded as the proper expenses of sale of the asset should be deducted in arriving at the net proceeds of sale.

In the IBA, ABA and ATA legislation a transfer of the relevant interest, otherwise than by way of a sale, is treated as a sale of the relevant interest at market value.