Couple Overturns Tax Authority Decision for £6 Million Loss
HM Revenue and Customs (HMRC) may appear a very daunting battalion, but with the right legal advice, individuals can succeed in overturning their decisions. Recently, a couple succeeded in doing so.
The couple had lost over £6 million when attempting to buy a luxury holiday home overseas. Initially, they had entered into a contract to purchase off plan. The contract included two neighbouring villas on the island of Barbados, costing $25.9 million. These were to become a holiday home for their family. The couple paid a deposit of over $5 million, and stage payments as construction targets were met brought their overall outlay to almost $11.3 million.
However, after the developer experienced cashflow difficulties arising from the 2008 financial crisis, building works were first delayed and then suspended. Although the couple retained rights to the villas, they were of negligible value in that the works were unlikely ever to recommence. The partially built villas stood derelict and the couple had yet to recover any of their money.
The couple, who calculated their joint losses at almost £6.25 million, sought to set that sum off against Capital Gains Tax (CGT) liabilities arising in subsequent tax years. After HMRC refused to allow them to do so, the couple lodged an appeal to the First-tier Tribunal (FTT).
In upholding the appeal, the FTT noted that it was accepted that they had acquired an asset when they contracted to purchase the villas and that they had suffered a commercial loss in that the villas were unlikely ever to be completed. They had paid the relevant sums to acquire, or enhance, their contractual rights and Section 38 of the Taxation of Chargeable Gains Act 1992 thus entitled them to deduct their losses from future CGT liabilities.
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