½Û×ÓÊÓƵ

When an asset is disposed of the seller may accept a liability to make payments to the purchaser if an event happens or the asset is not as described in the contract – the liability to pay taken on by the seller is called a contingent liability.

In Randall¹, it was decided that the contingent liability should be reflected in the capital gains tax computation as a reduction of the consideration received for disposal of the asset, because part of the consideration received was referable to the assumption of the liability (see full details of the case below). However this decision meant that disposal proceeds could be artificially reduced by a liability which is never expected to arise and there is no method of adjusting the capital gain when the contingency turns out to be wrong².

Therefore any contingent liabilities which occur in the following common circumstances are not taken into account in calculating the initial chargeable gain³:

1. Ìý

   •ÌýÌýÌýÌý a disposal by way of an assignment of a lease of land or