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Mark Appleton
Mark Appleton,
PARTNER
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CGT and joint ventures, collaborations, sales agreements and options
18 January 2017

Care needs to be taken when agreement is entered into with other land owners where the proceeds of sale are divided in accordance with their property holdings. This could be by way of a collaboration agreement, promotion agreement or otherwise.

Ignoring any difficulties in agreeing what mechanisms there may be in relation to “equalisation”, the results can be disastrous as there could be a double charge to Capital Gains Tax.

If, ultimately, the parties share the net proceeds of sale according to their different land holdings, this can lead to difficulties. 

This is particularly the case where each land owner becomes entitled to the net share proceeds of sale whether or not it relates to that owner’s land. The owner of the phase of land being sold will be liable to pay CGT on the whole of the proceeds of sale regardless of the fact that a proportion of the proceeds is actually paid to other land owners.

Those land owners will likewise be liable to pay CGT on the share of the proceeds of sale that they receive and, obviously, as they do not own the land, they cannot deduct costs such as the purchase price of that property as it is not their property. 

There may be ways of mitigating this by, say for example, creating some trust arrangement but, ultimately, it might be necessary to take advice in relation to how best to structure the transaction to avoid any adverse tax consequences.

If you require further information on anything in this article, please contact Mark Appleton at [email protected] or on 0118 952 7246

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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