CGT 42 Transactions in UK Land Flashcards
There are anti-avoidance provisions designed to charge income tax on profits generated from…..
‘trading in or developing UK land’
These rules can apply to any disposal of UK land where the main purpose, or one of the main purposes, of acquiring the land was to
realise a profit from its disposal, or where land
is developed with the main purpose, or one of the main purposes, of realising a profit from
disposal.
Who are the rules targeted at?
The rules are primarily targeted at property developers who are not otherwise carrying on a trade.
If the ‘transactions in UK land’ rules apply, what are the consequences?
any profit or gain is charged to income tax (not CGT).
Where a property is acquired as an investment (for example, to generate rental income), but the property is later developed and sold at a profit…..
only profits relating to the period where a development intention existed will be charged to income tax.
What is a ‘slice of the action’ contract and what are the consequences?
the landowner receives a fixed sum for the land plus a
percentage of the sale proceeds from a future development. In this case, the fixed initial payment is charged to CGT but the ‘contingent’ consideration – ie the amount based on
future sales by the developer – is subject to income tax.
The ‘transactions in UK land’ rules also apply to disposals of property deriving its value from land in the UK. These provisions will typically apply where a person disposes of …..
shares in a company that develops the land. These rules only apply if, at the time of the disposal, at least 50% of the value of that asset is derived from land in the UK and an arrangement is in place the main purpose of which is to realise a profit from a UK land disposal.
The transactions in UK land rules apply if one of four conditions are met:
Condition A:
Land is acquired with the main or one of the main purposes of realising a profit or gain from its disposal, s.517B(4) ITA 2007.
The transactions in UK land rules apply if one of four conditions are met:
Condition B:
Property deriving its value from land is acquired with the main or one of the main purposes of realising a profit or gain from disposing of the land, s.517B(5) ITA 2007.
The transactions in UK land rules apply if one of four conditions are met:
Condition C:
Land is held as trading stock, s.517B(6) ITA 2007
The transactions in UK land rules apply if one of four conditions are met:
Condition D:
Land is developed with the main or one of the main purposes of realising a profit from disposing of the developed land s.517B(7) ITA 2007
