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The consideration for a disposal cannot be negative. It is possible the seller of an asset may have to meet a contingent liability which is greater than the consideration they received. The adjustment due under TCGA92/S49 (2) is to reduce the consideration received to nil. It cannot produce a negative figure. For example in CG14805 suppose the taxpayer had to pay 拢120,000 under the warranty. The disposal consideration of 拢100,000 would be reduced to nil. The balance of the payment 拢20,000 would not be allowed for Capital Gains Tax purposes. The disposal will still give rise to a loss but the loss will be restricted to the base cost of the shares plus incidental expenditure.

A payment received by the purchaser under a warranty or representation will represent a capital sum derived from an asset assessable under TCGA92/S22. This applies whether or not the vendor has had relief under TCGA92/S49. In practice you can reduce the purchaser鈥檚 acquisition cost by the amount received. Any excess over the acquisition cost will be taxable, see CG13010 for further guidance.