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HMRC internal manual

Capital Gains Manual

Land: disposals: ESC D18

This concession applies where the vendor of an asset regains ownership of that asset following a default by the purchaser on repayment of a loan granted by the vendor. All the following conditions must be satisfied before the concession can apply.

  • On the sale of the asset, the vendor grants to the purchaser a loan of the whole or part of the sale proceeds.
  • The purchaser subsequently defaults on repayment of the loan.
  • As a result of the default, the vendor regains ownership of the asset.
  • The vendor and the purchaser are not connected persons, see CG14560+.

If all the conditions in CG72830 are satisfied, and the vendor claims the benefit of the concession, the gain arising is to be treated as the amount of the net proceeds actually retained by the vendor. The loan is treated as never having come into existence.

On any later sale of the asset the computation of the gain or loss will be made by reference to the original date and cost of acquisition.