New queries, issue 4575

Land collaboration

Capital gains tax liability on agreement for landowners to pool their land.

My farming client is considering clubbing together with neighbouring landowners to make a site more attractive for residential development. An ‘equalisation’ agreement is being contemplated where each disposing landowner will pay a share of the proceeds to the others based on the respective acreages contributed into the ‘pot’. The concern is that a double capital gains tax charge will result following the case of Burca v Parkinson.

In essence the ‘pay-aways’ are not deductible for the vendor under TCGA 1992 s 38 and the others have a capital gains tax liability on the crystallisation of a chose in action. This at least appears to be the strict position but is it a point that HMRC take in practice?

Have any Taxation readers had experience of HMRC allowing a deduction for the...