Question:
I am selling land to a developer. There is a covenant that I have to pay. Is the covenant payment allowable against capital gains tax?
Arthur Weller replies:
When someone sells land to a developer, sometimes the seller imposes a 'restrictive covenant' on the buyer. To do so can mean increased legal costs for the seller. If you look at HMRC’s Capital Gains manual (at www.gov.uk/hmrcinternal-manuals/capital-gains-manual/cg15250 and www.gov.uk/hmrc-internal-manuals/capital-gainsmanual/cg15280), you can see that these legal costs should be allowable as 'incidental costs', to reduce the capital gain.
