Income and Corporation Taxes Act 1970

1 (1) Save as provided by paragraph 2 below, a person's acquisition or disposal of an asset by a contract in that behalf shall be disregarded for the purposes of Case VII if—

(a) the contract is discharged by mutual consent or by operation of law, or

(b) default is made in carrying out the contract and, by reason of that default, there is no conveyance or transfer to implement the contract, whether by or to the person originally making the contract or another, or

(c) the contract is conditional and the condition is not satisfied.

(2) Where a person disposes of an asset, and the whole or part of the consideration is irrecoverable, the amount irrecoverable shall be disregarded in so far as it is not realised by the disposal in whole or in part of the right to the consideration ; and if the consideration is abated for any error in or default under the contract, Chapter VIII of Part VI of this Act shall apply as if the abated consideration had originally been contracted for.

(3) If, in the case of a conditional contract to acquire or dispose of an asset, the condition is satisfied (and, in particular, if in the case of a contract conferring an option the option is exercised), then, subject to sub-paragraphs (4) to (6) below, the acquisition or disposal of the asset by the contract shall be treated as taking place at the time when the condition is satisfied.

(4) If the disposal of an asset by a conditional contract is made for a consideration not depending wholly or mainly on the value of the asset at the time the condition is satisfied, the contract shall in relation to the disposal be treated (on the condition being satisfied) as if it had never been conditional.

(5) Where a contract for the disposal of an asset is discharged by mutual consent, but is replaced by a new contract for its disposal to the same person or to another in his place, the disposal by the new contract shall be treated as if it had taken place at the time when the disposal by the previous contract is to be treated as having taken place, and, if the previous contract was a conditional contract, the condition shall for that purpose be treated as satisfied by the making of the new contract.

(6) Nothing in sub-paragraphs (3) to (5) above shall apply in relation to a contract entered into before 10th April 1962.