E2. Forfeit of deposit

Capital gains tax

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Rescission of contract and forfeit of deposit not a disposal of an asset

"[55] I conclude that Hardy is binding authority in this case – and so this appeal must be dismissed, as the rescission of the Contract, by reason of the appellant’s repudiatory breach, did not constitute a disposal of an asset for capital gains purposes.

[56] If I am wrong in the foregoing analysis – i.e. if the decision in Hardy is per incuriam, or if Hardy is not binding authority in this case – my decision would be as follows: (1) I am not persuaded that Hardy was correct to say, as regards ‘issue 1’, that rights under a contract to acquire land are not assets for capital gains tax purposes; (2) however, it is not necessary to reach a firm conclusion on this point because, even if they are, it is clear that a forfeited deposit of purchase money does not constitute the disposal of a capital gains asset: see s144(7) read together with s144(4). This was the analysis of ‘issue 2’ in Hardy, and I respectfully agree with it..." (Drake v. HMRC [2022] UKFTT 25 (TC), Judge Citron)

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