Taxes Consolidation Act 1997 section 562

Contingent liabilities

Section 562 restricts the deduction of contingent liabilities when computing chargeable gains or allowable losses on the disposal of assets, and provides a mechanism for adjustment if those liabilities later crystallise and are actually paid.

• Contingent liabilities arising on the assignment of a lease, the sale or lease of land, or from warranties on disposals of non-land property cannot be deducted when computing a gain or loss
• If a contingent liability becomes enforceable and is actually enforced, the gain or loss may be recomputed and tax adjusted accordingly, provided a claim is made within four years of the end of the chargeable period in which the liability became enforceable
• No adjustment is permitted unless the person who disposed of the asset has actually paid an amount equal to the contingent liability
• The general time limit for repayment claims under section 865 does not prevent an adjustment or repayment arising from the crystallisation of a contingent liability