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The right to bring an action to enforce a claim is an asset for capital gains purposes if it can be turned to account by a negotiated settlement involving payment of a substantial capital sum¹.

In Zim Properties² the payment of agreed compensation by the taxpayer's solicitors for loss arising from their negligence was held to be derived from the taxpayer's right to sue the solicitors. That right was an asset of the taxpayer company and was acquired by it when its cause of action arose (although no asset was acquired by the solicitors on making the payment). The company had suffered loss when the contract for sale of some of its properties was rescinded by the purchaser because the company was unable to show a good title to the property. The cause of action arose on the date when the contract was entered into and consequently that was the date when the right was acquired by the taxpayer. The acquisition of the right was not an arm's length transaction