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HMRC internal manual

Capital Gains Manual

Assets disposed of: series of xactions: composite sale/separate contracts

If a number of assets are sold in one contract for a single figure of consideration you may need to apportion that consideration, see CG14771+. You may also face the converse situation where what is really a single disposal is made under a number of separate contracts. These contracts may be presented to you as separate arm’s length bargains at separate prices so that there is said to be no need to make any apportionment. You may face the argument that Section 52(4) should not apply since an apportionment is not ‘necessary’.

Structuring the transaction in this way may be intended to allocate an excessive part of the proceeds to an asset which is exempt (for example, a private residence), or one on which any gains could be deferred (for example, by roll-over relief).

Information may be presented to you in such a way that you are unaware of the existence of separate contracts. A farmhouse, for example, which is exempt as a private residence, may be sold with 10 hectares of land. One contract is drawn up for the sale of the farmhouse plus half a hectare for 90% of the total consideration while a second contract for the remaining 9.5 hectares is drawn up with the consideration being the balance of 10%. The only information which is returned is the sale of the 9.5 hectares, the taxpayer relying on the private residence exemption for the sale of the rest.

If the Valuation Office Agency is aware that two contracts have been used, then they will report the matter to you. In these cases, we would argue that Section 52(4) does apply and that the comments in Booth v Buckwell, see CG14773, are applicable. Also see CG14540+ on the use of the market value rules.