Land: disposals: ESC D18: example
A sells an asset to B for £50,000, realising a gain of £35,000 after legal fees of £1,000.
B actually pays £10,000 initially to A, and A grants B a loan of £40,000. That loan is repayable in four equal annual instalments.
B pays the first instalment of the loan of £10,000 but fails to pay the next instalment. As a result, A regains ownership of the asset.
A and B are not connected.
A claims the benefit of ESC/D18.
All the necessary conditions for ESC/D18 are satisfied, and therefore the gain arising to A is to be treated as the net amount actually received, that is £20,000 less the legal fees of £1,000 = £19,000.
The disposal to B is treated as never having occurred, and the loan is treated as never having come into existence.
If A subsequently sells the asset, the gain or loss arising is calculated by reference to the original cost and date of acquisition.