Losses claimed for payments made under a contract to buy land

In 2007 the taxpayers entered into contracts with the vendors to buy two plots of land in Barbados on which two villas were to be built. The taxpayers paid a large deposit for each plot and made further payments as agreed. By early 2009 due to the financial crisis construction of the villas was suspended.

In 2011 the taxpayers and the vendors agreed to terminate the 2007 contracts. The taxpayers obtained rights to recover some of their money in return for giving up their rights under the contracts but never received any.

They claimed capital losses under TCGA 1992 s 38 in their tax returns but HMRC refused.

The First-tier Tribunal said the rights under the 2007 contracts were assets of the taxpayers; this was on the basis of the Court of Appeal decision in Underwood v CRC [2009] STC 239. Further they had suffered a...