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HMRC internal manual

Capital Gains Manual

Arrival in and departure from the UK: establishing the correct time when a gain arises: binding contract pre-dating emigration

A disposal occurs at the earliest time at which there is a binding contract between the parties. Except where there is a statutory requirement for a contract to be in writing if it is to be valid (see CG25853 above), it does not matter whether the contract is oral or written. Thompson v Salah 47TC559 established that a binding oral contract can be just as effective as a written contract in giving rise to a disposal for Capital Gains Tax purposes.

Establishing the existence of a binding contract or agreement, oral or written, in advance of the formal contract presents considerable difficulty, see CG25850 above, and requires the facts of the case to be established in detail. Usually this will involve reviewing the correspondence, notes of meetings, telephone conversations, etc which have taken place between the vendor and purchaser (or more usually their professional representatives) prior to the date of signing the formal documents, to see whether there is evidence of a binding oral agreement or whether the correspondence itself constitutes a binding written agreement. It will not usually be worthwhile to undertake such a detailed review unless there are strong prima facie indications of a pre-emigration binding agreement.

If a binding agreement prior to the date of formal documentation can be established, the date of the earlier agreement is the date of disposal for Capital Gains Tax purposes.