Deed nullity and CGT

I will dispose of a property abroad within the current tax year. For an error occurred during the purchase the disposal has to be ruled by a judge in Italy through a “nullity of the deed” verdict. The property will go back to its previous owner who already refunded me of the original purchase price. However I have incurred in several expenses (attorney for exemple) that would create an overall loss. Could I offset this loss against the gain of this year even if it’s an unusual disposal (deed nullity)? Thanks

Hi Luca LOMBARDI,
Yes.  
As you are disposing of a foreign property, you would need to report the loss to HMRC in a self assessment tax return and in that return, offset the losses against the other gains in the year.
Thank you.

Thank you for your answer. Can a nullity verdict be considered as a disposal? It’s not a normal sale, or a gift or a distroyed asset. The judge will simply return the property to the previous owner as the deed, signed back then is null Can I treat this property as any other one in terms of CGT calculations?

Hi Luca LOMBARDI,
It's not quite clear from the first couple of lines whether you will be disposing of another property in this year as well as the one that you are querying.
I will just concentrate on the property that is queried. We haven't got all the relevant facts,  and  it's for you to self-assess correctly. What we can say is that how this is treated will depend on whether you actually had beneficial ownership of the property and was ordered by the court to hand it back or if in fact you never had beneficial ownership at all and the contract was simply voided (the exact reasons how this happened aren't stated in the query).
If you didn't ever have beneficial ownership of the asset (which may be the case here) then any incidental costs of acquisition incurred would not be allowable, as per CG15250 'The expenditure must have been incurred wholly and exclusively for the purposes of acquisition or disposal of the asset'. And if there wasn't any asset actually acquired then it would in effect be abortive expenditure that is not allowable expenditure for CG purposes.
If on the other hand you did have beneficial ownership and so it was classed as an acquisition and then a disposal (for the same amount) then any incidental costs of acquisition or disposal, as per the exhaustive list at CG15250/60 may be allowable.
However these allowable costs would not include any costs incurred to preserve or defend title to the asset, where that case was lost. 
It will be for you to determine (based on the facts of the case) if you actually had beneficial ownership or not (we would only look at this if it was part of an enquiry).
CG70230 has some information on this but they may wish to seek professional help if they need further help with this.  
Thank you.

Hi and thank you for your reply. I have owned the flat for 12 years and rented it out for the majority of the time. Income has always been added to my self assessments both in Italy and the UK. When I was trying to sell it 2 years ago, the notary found an old assessment by a tribunal that deemed the property inhabitable and unsellable. The mistake was made by the notary who never should have countersigned the deed and authorized the transfer of ownership. Furthermore, the previous owners recognized the mistake and agreed to take back the flat, giving me back the money I spent. The ownership can be transferred only by a judge who needs to rule a “deed nullity”, the most appropriate for this case. This should be ruled in a few days and so should be the money transfer . Would all these incidental costs be considered a loss? As the previous owner is giving me exactly the same amount I spent, the loss would be solicitor fees and stamp duty plus a small fee for my lawer. Is this correct? Another related problem is the following: When I tried to sell the property a deposit was paid to me by the buyer and an exchange of contract was signed. As I said before, I found myself unable to proceed with the sale and therefore liable for damages . We settled for an amount that was way lower than what I should have paid. The settlement was countersigned by a solicitor and everything has been paid during the PREVIOUS tax year. As I’m disposing of the property now through a deed nullity, can these damages be considered a loss? Obviously the previous self assessment should be amended. Again thank you for your answer and for your patience so far

Hi,
These were costs you incurred in acquiring and disposing of the proprerty.  
Even if there is no gain arising from the disposal, you still incurred those costs, so you can set them against the £0.00 gain, resulting in a loss.  
Losses do not have to be reported to HMRC, but if you want to set them against other capital gains or carry them forward, you will need to submit a claim in writing, including supporting evidence, if you do not complete a self assessment tax return.  the onl other alternative is to claim the losses in your tax return for the year the losses arise, including supporting evidence with your tax return.
Thank you.

Thanks a lot, very precious information. Just to clarify, also the damages I payed the potential buyer that I was taking about, can be considered a loss as they incurred during a disposal? (Or at least when I was trying to dispose) Once again thank you for your service

Hi,

Further to our previous answer, the costs incurred are dependant on any beneficial ownership to then be claimable as a capital loss.

Thank you.