Q&A: Claiming a capital loss in respect of a lost deposit

Q. In early 2020 I entered into an agreement to purchase the leasehold of a commercial property that was under construction in exchange for a premium of £400,000. The agreement stated that a 15% deposit was to be paid plus a 10% stage payment 12 months later with the balance on completion. Unfortunately, my business folded because of the pandemic, and I defaulted on the later stage payment. This was deemed to be a breach of the agreement, the contract was never completed, and the builder kept the deposit. Can I claim a capital tax loss in respect of the lost deposit?

A: Unfortunately, not - a capital loss can only be claimed when there is a disposal, or deemed disposal, of a chargeable asset. In this case, the terms of the contract were not adhered to, so you could not take possession of the underlying asset so no loss can be claimed.

About the Author

Paul Newbold

Partner

After qualifying with KPMG where he gained significant audit experience, Paul joined Torgersens in 1991 and became the firm’s audit partner in 2000. Paul employs his broad range of financial skills to provide commercial and accounting advice to a range of owner-managed businesses in the independent retail, education and professional services sectors. He also has extensive experience dealing with charities, Registered Social Landlords and not-for-profit organisations and co-operatives.   Outside of work, Paul likes to visit Eastern France and South-West German and read novels by David Morrell, Michael Blake and Harper Lee. He also likes watching films, his favourite is The Shawshank Redemption.

To get in touch please e-mail paul.newbold@torgersens.com.