An exchange on a property took place in the tax year 2019/20. The buyer failed to complete and is suing the seller for the return of the deposit, which was released to the seller on exchange. If the case does not come before the court in the current tax year, the seller may have to return the money in the following tax year, depending on the outcome. Does the seller have to pay capital gains tax (CGT) on the deposit prior to the outcome of the case? Is it payable in the year in which it would become due now, even if their right to it is disputed by the failed buyer? 

Arthur Weller replies:  

Please read HMRC’s Capital Gains manual at CG12340, CG12350 second bullet point, CG12940 and CG12952. It seems to me that the seller is liable to CGT if they keep the deposit. See CG12960 about when the CGT is due.