CheckLists.Tax (beta)
B1. Sale, disposal, assignment
FORMALITIES
- Execution of a deed
- Deed must make clear on its face that it is intended to be a deed by the person(s) making it (LPMA s.1(2)).
- "[50]...As in the case of Quinn , there are indications that the document was intended to be a formal one and to have formal legal effect, but this does not amount to showing that the parties intended the document to have the extra status of being a deed. The fact that the powers of attorney are signed and sealed by the attesting witness would satisfy the requirements of subsection 1(3) for it to be validly executed as a deed (provided it is delivered as a deed) but that in itself does not “make it clear on its face” as required by subsection 1(2)(a) that it is intended to be a deed. As the Law Commission noted, the requirement that it should be clear on the face of the document was felt to be desirable in order to make it easy to distinguish in practice deeds from other documents which have similar provisions for witnessing and signing." (Katara Hospitality v. Guez).
- Every party must objectively intend it to be a deed (MacDonald Hotels §243)
- Deed is executed by an individual where it is:
(1) Signed by him/her in presence of a witness who attests the signature; or
(2) Signed at his/her direction in his/her presence in the presence of two witnesses who each attest signature.
+ in either cases, delivered as a deed (LPMA s.1(3), 4(A)).
- If a lawyer, in the course of a transaction, purports to deliver an instrument as a deed on behalf of a party, it is conclusively presumed in favour of purchaser that lawyer was authorised to do so (s.1(5)).
- Query whether electronic signatures may be used.
Witness
- Witness must actually observe the signature (Euro Securities, §54.1).
- Witnesses must be present at time of signing, but (probably) need not attest at the same time/in presence of person executing deed: "Overall, given what seems to me to be the clear wording of section 1(3) , I find that the proper interpretation is that while there is a requirement for the person executing the deed to sign in the presence of a witness, it is not a requirement for the witness to sign in the presence of the person executing the deed (or indeed of anybody else)." (Wood v. Commercial First Business Limited, §48; See also Euro Securities, §79).
- Query whether witness can be another party to the deed (Euro Securities & Finance Ltd, §55.3).
- Witness need not be independent: "The first reason is that there is a requirement that a deed is witnessed. The witness does not have to be independent under statute: it is simply that if the witness is not independent, then there might be problems thereafter in proving that she did in fact sign the document." (Copeland; §56).
- Attestation must be part of same physical document as signature (Mercury, §40).
Virtual execution
- See Law Society Guidance.
Legislation: LPMA 1989, s.1;
Cases:
R (oao Mercury Tax Group Limited) v. HMRC [2008] EWHC 2721 (Admin), Underhill J;
Wood v. Commercial first Business Limited [2019] EWHC 2205 (Ch), Deputy Judge James Pickering;
Katara Hospitality v. Guez [2018] EWHC 3063 (Comm), Moulder J;
Copeland v. Bank of Scotland Plc [2020] EWHC 1441 (QB), Freedman J;
Euro Securities & Finance Ltd [2023] EWHC 51 (Ch), HHJ Tindal;
Macdonald Hotels Limited v. Bank of Scotland Plc [2025] EWHC 32 (Comm), HHJ Pelling KC;
HMRC manuals:
Commentary:
See also: Law Society Guidance on virtual execution.
Assignment of choses in action
- Formalities for absolute assignment at law of debt/contractual right/chose in action
- LPA s.136 provides for the "absolute assignment" of "any debt or other legal thing in action".
- Must be by writing under the hand of the assignor and express notice must be given to the debtor.
Legislation:
Cases:
Good v. HMRC [2023] EWCA Civ 114;
HMRC manuals:
Commentary:
See also:
- Conditional assignment of debt/contractual right/chose in action only valid in equity
- LPA s.136 provides for the "absolute assignment" of "any debt or other legal thing in action".
- If assignment only operates until, for instance, a debt has been discharged, it is conditional (Good, §103).
- If only valid in equity, assignor retains legal title to the chose in action and a right to the benefit of it subject to the condition being satisfied (which may give rise to entitlement to income).
Legislation:
Cases:
Good v. HMRC [2023] EWCA Civ 114;
HMRC manuals:
Commentary:
See also:
- General points re assignment
- No assignment of future chose in action, but difficult distinction to draw (Burley, §96).
- Query whether assignment can be effected by agreement to which purported assignee is not a party (Burley §97).
- Query whether consideration for the assignment needs to flow from the assignee (Burley, §100).
- Prohibitions on assignment do not prevent assignment being effective as between assignor and assignee but may affect the position between the assignor and their counterparty (Burley §101).
Legislation:
Cases:
(Burley v. HMRC [2025] UKFTT 989 (TC), Judge Baldwin)
HMRC manuals:
Commentary:
See also:
- Little difference between legal and equitable assignment
- "[95] Although this transaction did not fulfil the requirements to be an assignment at law, it is perfectly possible for an assignment to take effect in equity. It has been observed (Guest on the Law of Assignment, 5th ed, para 2-03) that, except for the procedural advantages which attach to the statutory assignee's legal title to sue and the absence of any requirement of consideration for a statutory assignment, there is little difference between an equitable assignment and a statutory assignment." (Burley v. HMRC [2025] UKFTT 989 (TC), Judge Baldwin)
INCOME TAX
Trading income
- Identifying trading receipts
XX
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
Sale of occupation income
XX
XX
Legislation: ITA s.780
Cases:
HMRC manuals:
Commentary:
See also:
Sale with foreign currency elements
Correct approach to calculating gains
XX
Legislation:
Cases: Rawlings v HMRC [2022] UKFTT 32 (TC), Judge Amanda Brown QC
HMRC manuals:
Commentary:
See also:
XX
- Situs of assets
- Contractual obligation usually situated in the country in which it can be enforced (HMRC v. Royal Bank of Canada [2025] UKSC 2, §48).
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
Transfer of assets abroad
- Disposal/sale of asset to non-resident person by individual/closely held company as a relevant transfer
- See i1. Creation and addition to trust.
- A disposal is still a transfer even if it is full consideration: "The fact that an individual may receive a payment or consideration in full for a movement of some form of property from one person to another does not prevent that action from being a transfer for the purposes of the transfer of assets rules." (INTM600240).
- Query whether income "becomes payable" to the person abroad if the result of the transaction is that the person abroad replaces one income stream (from old asset) with a new income stream (from the transferred asset). Kessler argues not (Ch 48).
Legislation:
Cases:
HMRC manuals:
INTM600240 - Transfer of assets abroad: General conditions: What is a transfer?;
Commentary:
See also: Kessler, Chapter 48;
- Trust 1 buys an asset from Trust 2 (matching benefits from Trust 1 to income of Trust 2)
The scenario
- Assume that:
- T is a beneficiary of both Trust 1 and Trust 2 (funded by separate transfers).
- Trust 1 buys an asset from Trust 2 (market value).
- Trust 1 distributes that asset to T.
- Trust 2 has income but Trust 1 does not.
- Can the income of Trust 2 be matched to the benefit from Trust 1?
- HMRC have argued yes: the asset which Trust 1 distributed was "available for the purpose of providing the benefit" because of the transfer (on sale) from Trust 2.
- If that is right, the benefit (distribution of the asset) is out of assets available for the purpose as a result of an associated operation by Trust 2 (the transfer).
- In which case, income of Trust 2 can be matched to the benefit of the distribution of the asset to T.
- For the contrary view see i9. Benefits provided by trust.
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
CAPITAL GAINS TAX
- Assets
General
- The mark of an asset is something which the owner can turn to account (Underwood, §41).
Legal rights as assets
- Rights of purchaser under contract of sale were an asset that were turned to account to receive payment where contract was not completed in accordance with its terms in Underwood (§52).
Legislation:
Cases:
Underwood v. HMRC [2008] EWCA Civ 1423, Collins, Neuberger, Goldring LJJ;
HMRC manuals:
Commentary:
See also:
- Disposals
General
- Save for deemed disposals, disposal has its "normal" meaning (Underwood, §62).
Contracts for disposal
- Entering into a contract for sale is not a disposal for CGT purposes (Underwood, §4).
- Not does it transfer the beneficial interest for CGT purposes (Underwood, §51).
Multi-party situations
- Where A sells to B who sells to C and there is a single transfer from A to C, there are two disposals (Underwood, §67).
- But where A sells to B and purports to repurchase, without any transfer to B, there is no disposal to B.
- See Underwood:
- A agreed to sell to B Ltd, A having an option to repurchase.
- Before completing that contract (and without formally exercising the option to repurchase), A entered into an agreement to repurchase the property from B Ltd and agreed to sell the land to C Ltd.
- There was a single transfer of property from A to C.
-The sale to B Ltd was intended to crystallise a large loss (at the time of the original contract to sell to B Ltd). B Ltd was not connected with A.
- HMRC argued that there was a single disposal from A to C Ltd. C Ltd was connected with A, so it was a clogged loss.
- CoA agreed with HMRC. The original contract between A and B Ltd was not performed - instead a sum was paid as substitution for the performance.
Legislation:
Cases:
Underwood v. HMRC [2008] EWCA Civ 1423, Collins, Neuberger, Goldring LJJ;
HMRC manuals:
Commentary:
See also:
- Timing of disposal
Disposal under unconditional contract: time of contract
- Where asset disposed of and acquired under a contract, time of disposal and acquisition is time contract is made (not time of transfer) (TCGA s.28(1)).
- Must be both a disposal and an acquisition, not just a disposal.
- Only applies once there is actually a disposal (e.g. transfer or conveyance).
- Does not deem asset to be disposed of at a time when it has not been disposed of (Underwood, §4; Jerome, §11).
- If the contract is not completed, there will be nothing to deem to have happened at the time of the contract (Underwood, §37).
- Various time limits (claims, assessments) run from time of transfer, however (TCGA s.28A).
Performance not in strict accordance with contract
- Query whether it includes performance that is at variance with the strict contractual terms, e.g. completion date.
- In Underwood, HMRC argued that if a land sale contract is completed prior to the contractual completion date, the transfer is not "under" that contract unless it is properly varied (which requires signed writing).
- Neuberger LJ: "It is unnecessary to decide the point, but I am very sceptical about its correctness. Assuming that the basis for the point was otherwise sound, I would have thought that the words "under a contract" are apt to cover a disposal to which the parties are committed by virtue of a contract, even when they complete that contract early as a result of a non-binding agreement to do so." (§69).
Disposal under conditional contract
- If contract is conditional (e.g. depends on exercise of option) time of disposal and acquisition is when the condition is satisfied (TCGA s.28(2)).
Meaning of conditional
- Query whether one party having right to refuse to give effect makes contract conditional (Kellogg, §14).
- In Kellogg, a share disposal agreement was "genuinely conditional" on a distribution of shares of the purchaser (§21).
Legislation: TCGA s.28; s.28A;
Cases:
Jerome v. Kelly [2004] UKHL 25;
Underwood v. HMRC [2008] EWCA Civ 1423, Collins, Neuberger, Goldring LJJ;
Kellogg Brown& Root Holdings (UK) Ltd v. HMRC [2010] EWCA Civ 118;
HMRC manuals:
Commentary:
See also:
- Contract shortly before death
- If T enters into an unconditional contract shortly before death, T will lose the CGT uplift on death.
- T may also lose IHT business property relief (see IHTA, s.113).
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
- Consideration
XX
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
- Connected party disposal
Time to test
- Test whether there is a connection at the time of the disposal.
- If disposal deemed to take place on a particular date (e.g. under s.28), test connection on that date (Kellogg, §23).
Legislation:
Cases:
Kellogg Brown& Root Holdings (UK) Ltd v. HMRC [2010] EWCA Civ 118;
HMRC manuals:
Commentary:
See also:
REMITTANCE BASIS ISSUES
- Assets: whether asset derived from remittance basis income remains so derived in hands of relevant person purchaser
- X buys an asset using X's remittance basis income, X sells that asset to Y:
- In Y's hands the asset does not derive from X's remittance basis income.
- For Y, the asset derives from the money Y used to buy it (which may be clean capital).
- The same result should logically apply if X leaves the consideration outstanding (the asset in Y's hand derives from the promise to pay).
- If that is wrong, the asset derives from both X's remittance income and whatever Y used to buy the asset (which could be Y's own remittance basis income).
- X and Y could both be relevant persons in relation to each other, in which case Y bringing the asset to the UK seems to remit both Y's and X's income (see s.809P(3), (5), (12)).
- The multiple charges could be on the same person (e.g. where X is a company on whose income Y is taxable under TOAA).
- Clarke agrees that the asset in the purchaser's hands is not derived from the income/gains the vendor used to buy it, at least where the purchase is on commercial terms (§§33.11 - 13).
Legislation: ITA 2007, s.809L; s.809P;
Cases:
HMRC manuals:
Commentary: Kessler, Chapter 17; Clarke, §33;
See also:
- Assets: whether purchase money derived from remittance basis income remains so derived in hands of asset vendor
- X sells an asset to Y, Y pays using Y's remittance basis income:
- The sale price money received by X from Y does not derive from whatever source that money had for Y (e.g. remittance basis income).
- For X, the money received derives from the asset that X sold.
- If that is wrong, the purchase money derives from both Y's remittance income and whatever X used to buy the asset (which could be X's own remittance basis income).
- X and Y could both be relevant persons in relation to each other, in which case Y bringing the asset to the UK seems to remit both Y's and X's income (see s.809P(3), (5), (12)).
- The multiple charges could be on the same person (e.g. where Y is a company on whose income X is taxable under TOAA).
- Clarke agrees that the purchase money in the vendor's hands is not derived from the income/gains of the purchaser, at least where the purchase is on commercial terms (§§33.11 - 13).
Legislation: ITA 2007, s.809L; s.809P;
Cases:
HMRC manuals:
Commentary: Kessler, Chapter 17; Clarke, §33;
See also:
- Services: whether money used to pay for service which was remittance basis income for customer remains so derived in hands of service provider
- By parity of reasoning with an asset sale, the consideration received from the customer derives from the service provided rather than whatever source it had for the customer.
- Clarke says this argument is "respectable" but less clear due to absence of an asset from which it can trace for the service provider (§33.12).
- It is suggested that there is no such difficulty given that income can and often does arise from providing services (as may be the case for this very transaction).
Legislation:
Cases:
HMRC manuals:
Commentary: Clarke, §33;
See also:
INHERITANCE TAX
XX
- Sale for less than market value as a transfer of value/gift
XX
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
- Transfer of value where loss to transferor greater than gain to transferee (e.g. loss of majority stake)
Reduction in value of estate of transferor
- The relevant focus is upon the reduction in the value of assets in the transferor's hands, not upon any increase in the value of assets held in the hands of the transferee (Nelson Dance, §6).
- Loss to transferor may be greater than gain to transferee - e.g. 51% shareholder transferring 2% (Nelson Dance, §6).
No intention to confer gratuitous benefit
- If the recipient of the minority stake pays market value for that minority stake, T may be able to rely on s.10.
Subsequent disposition of the remaining shares
- If T subsequently disposes of the remaining minority stake (e.g. gift or sale to the person who bought the initial shares), HMRC may be able to rely on the associated operation rules to aggregate the dispositions.
- Two transfers would be aggregated and treated as a disposal of the majority stake at the later time (less the value of the original transfer).
- Fall in value of T's estate would be calculated based on market values at the later date.
- Associated operation may also mean that s.10 is disapplied from the earlier transfer.
Legislation: IHTA 1984, s.3;
Cases:
HMRC v. Trustees of Nelson Dance Family Settlement [2009] EWHC 71 (Ch), Sales J;
HMRC manuals:
Commentary: McCutcheon §9-30;
See also:
- Sale to company in return for shares in company (query whether shares worth less)
- Minority interest in company owning listed shares is worth less than outright ownership of the equivalent number of shares (Battle).
- Even sale in return for 98% was thought to carry a 2.5% discount (Battle at 93).
Legislation:
Cases: Battle v. IRC [1980] STC 86;
HMRC manuals:
Commentary:
See also:
- Exception: arm's length transaction not intended to confer a benefit not a transfer of value
Intention to confer gratuitous benefit
- Must be intention to confer a benefit (rather than intention to enter into a transaction that, as a matter of law, amounts to a benefit) (Parry, §60).
- Intention that a person be benefitted is not the same as an intention to confer a benefit.
- If that person's overall position is the same before and after, there is no benefit to them (Parry, §61, 65).
Consider relevant associated operations
- Transaction includes a series of transactions and any associated operations (s.10(3)).
- For meaning and scope of associated operations see C1. Gifts (general).
- For the purposes of s.10, an associated operation need not "necessarily per se confer a benefit but it must form a part of and contribute to a scheme which does confer such a benefit" (Macpherson at 176).
- But if the transaction "contributed nothing to the conferment of the gratuitous benefit which had already been effected" it would not be relevant (Macpherson at 176).
- In Parry, UKSC explained that, to be relevant, the associated operation had to be part of a scheme "actually conferring, and intended to confer, such a benefit" (§77).
- That was satisfied in Macpherson because the evidence was that the distribution from the trust would not have happened unless the commercia,, but depreciatory transaction, had taken place:
- "In Macpherson, the two elements under consideration were linked in the scheme by a common intention - the trustees would not have made the appointment if the variation had not taken place - and the scheme was one intended to confer, and actually conferring, gratuitous benefit on the son by the appointment of the pictures. The variation agreement therefore satisfied Lord Jauncey’s requirements that it “form a part of and contribute to a scheme which does confer … a [gratuitous] benefit” (my emphasis) and is intended to confer a gratuitous benefit." (Parry, §88)
- It was not satisfied in Parry where the omission to take lifetime benefits following a pension transfer was a continuing intention that pre-dated the transfer:
- "[88] ... The omission had already been decided upon whilst the funds were in the section 32 policy and the sons could have benefitted from it without any move to the PPP. Moving the funds from one policy to the other (the “transfer”, focused upon by the Notice) was not a contributory part of the scheme to confer gratuitous benefit on the sons; it was a step taken solely to ensure that Morayford could not benefit, as the FTT were entitled to find on the very unusual evidence in this case. The omission and the transfer were not therefore, in my view, relevantly associated." (Parry, §88).
HMRC view
- "The decision in Macpherson established that only operations which together are relevant to the tax charge being considered are to be taken into account as associated operations." (IHTM14828).
Legislation: IHTA s.10;
Cases:
IRC v. Macpherson [1989] AC 159 (HoL);
HMRC manuals:
Commentary:
See also:
Reliefs
- No business property relief where property is subject to a binding contract for sale
General rule
- Property is not relevant business property in relation to a transfer of value if, at the time of the transfer, a binding contract for its sale has been entered into (s.113).
- This can be particularly problematic if the contract is shortly before death (CGT uplift will also be lost).
Incorporation
- Exclusion does not apply if property is business/interest in a business and the sale is to a company which is to carry on the business.
+ consideration is wholly or mainly shares in or securities of that company (s.113(a)).
Reconstruction or amalgamation
- Exclusion does not apply if the property is shares/securities + sale is made for the purpose of a reconstruction or amalgamation (s.113(b)).
Legislation: IHTA s.113;
Cases:
HMRC manuals:
Commentary:
See also:
Excluded property
- Contract for the sale of UK residential land: between execution and completion
Purchaser position:
- General:
- A purchase contract does not transfer a beneficial interest in the property.
- Schedule A1:
- The value of the contractual rights to the purchaser before completion is attributable to UK residential property but is reduced by the obligation to pay the remainder of the purchase price.
- "HMRC: We agree that the value of the purchaser’s right would be subject to the obligation to pay the consideration." (HMRC Q&A, Q1).
Vendor position:
General:
- Vendor continue to own an interest in land. Case law indicates that although there is some form of trust, beneficial ownership does not pass to the purchaser simply by virtue of there being a contract.
- But see: "...the deceased’s interest at the date of death was in the proceeds of sale rather than the land itself. This is because their right in the property has been converted into the right to receive the balance of the purchase money. The balance of the purchase money therefore is a taxable asset of the estate." (IHTM23186).
Schedule A1:
- The vendor retains an interest in UK residential property pending completion.
- The value of which will be reduced by purchase consideration so far received (see the suggested answer to Q1 in HMRC Q&A).
Legislation:
Cases:
HMRC manuals:
Commentary:
See also: HMRC Q&A on Sch A1;
Gift with reservation of benefit
- XX
XX
Legislation:
Cases:
HMRC manuals:
Commentary:
See also: