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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
, see all updates

Assets disposed of: series of transactions: apportionment

If you need to apportion consideration, then you should check the relevant documentation, such as the contract for disposal, to see if an apportionment is provided. We would expect to see an apportionment in a case where unconnected parties have contracted a bargain at arm’s length. If they have, and if the apportionment appears reasonable by reference to the facts, then we would not expect to disturb it. There is clear authority for the proposition that the parties cannot disturb an apportionment they have agreed in a contract, see E V Booth (Holdings) Ltd v Buckwell, 53TC428.

In Booth v Buckwell it was held that the two parties to the contract could not seek to alter the agreed apportionment simply to mitigate a Capital Gains Tax liability. It was, however, acknowledged that ‘in certain cases’ the Inspector’s position would be different. The decision did not, however, define the circumstances in which the Inspector could alter an agreed apportionment.

Our current thinking is that we are only justified in using our powers under Section 52(4) where:

  • there is no apportionment provided, or
  • although there is an apportionment provided, this is unreasonable on the facts of the case.

We would not consider it justified to use our powers where:

  • there is an apportionment provided which is reasonable on the facts of the case

this would apply even where the apportionment produces a Capital Gains Tax, or other tax, result we do not like.