New asset

Capital gain on disposal of property

The taxpayer and his son acquired the lease over the upper floors and airspace of a building. They paid a developer CB LLP to undertake the work to create four residential flats. Two were sold to third parties another was sold to one of the partners in the developer and flat 2 was transferred to the taxpayer.

The taxpayer said there was no gain on the transfer of flat 2 to him because there had been no disposal. HMRC said it was a deemed disposal. The taxpayer appealed.

The First-tier Tribunal found that at the beginning of the project the taxpayer owned a half-share in the property. By the end he owned all of the lease in flat 2. A person could not dispose of an asset to themselves but in this case the taxpayer and his...