Hardy: CGT and forfeited deposits

The Upper Tribunal decision in Hardy [2016] UKUT 0332 (TC) is one which is at the same time unsurprising to most tax professionals and astonishing to the layman. The facts were simple. Mr Hardy contracted to buy a flat off-plan paying a deposit of £72 000. When the time came to complete the purchase he wasn’t able to do so and under the terms of the contract he lost his deposit. He claimed that for the purposes of CGT he had made an allowable loss of £72 000 which he sought to offset against other capital gains.

Mr Hardy had argued unsuccessfully before the First-tier Tribunal (FTT) that on entering into the contract he had acquired beneficial ownership of the flat which was an asset: and that when the vendor rescinded the contract he had disposed of that asset at a loss. Before the Upper Tribunal he...