Income Tax and Corporation Tax: disposals of land in the UK
Updated 3 February 2021
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Who is likely to be affected
Businesses that carry on a trade of dealing in or developing land in the UK.
General description of the measure
This measure amends the ‘Profits from Trading in and Developing Land in the UK’ legislation introduced in Finance Act (FA) 2016 to bring all profits recognised in the accounts on or after 8 March 2017 into the charge to UK Corporation Tax or Income Tax, regardless of the date the contract was entered into.
Policy objective
The intention of the legislation is to ensure that all profits from dealing in or developing land in the UK are brought into charge to UK tax. This puts all developers of UK land on an equal footing for tax purposes. The legislation took effect for disposals made on or after 5 July 2016, with an exception where the contract for disposal was entered into before 5 July 2016. The intention was to exclude the standard property disposal arrangement where the parties are committed on making the contract, but the transfer takes place a short time later. However, some contracts are entered into at an early stage in the development with transfers being made over an extended period of months or years. The result is that some profits from these long term contracts are not within the charge. This was not the intention when the legislation was enacted and this measure ensures that the rules set out in FA 2016 work as intended.
Background to the measure
The ‘Profits from Trading in and Developing Land in the UK’ measure was announced at Budget 2016 and had effect from 5 July 2016.
Detailed proposal
Operative date
The amendment will have effect in relation to profits recognised in accounts on or after 8 March 2017.
Current law
The ‘Profits from Trading in and Developing Land in the UK’ measure was announced at Budget 2016 and took effect for disposals of property on or after 5 July 2016. The legislation (sections 76 to 82 of FA 2016) brings into charge to UK Corporation Tax or Income Tax all profits from dealing in or developing land in the UK, irrespective of the residence of the person making the disposal. The current commencement rule at section 81 and section 82 of FA 2016 excludes profits from disposals made on or after 5 July 2016, but where the contract was entered into prior to 5 July 2016.
Proposed revisions
Legislation will be introduced in Finance Bill 2017 to the effect that all profits from dealing in or developing land in the UK that are recognised in the accounts on or after 8 March 2017 will be taxed. This will be the case even if the contract for disposal was entered into prior to 5 July 2016.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 |
|---|---|---|---|---|
| nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact. This measure supports the Exchequer in its commitment to protect revenue.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure is not expected to impact on individuals and households. This measure is also not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure is not expected to have a significant or disproportionate impact on groups with legally protected characteristics as recognised in the Equality Act.
Impact on business including civil society organisations
This measure is expected to have an impact on small number of businesses. It will impact offshore property developers who have made a contract for disposal of UK land prior to 5 July 2016 but recognise the disposal in their accounts after 8 March 2017.
If these businesses previously considered they were out of the scope of the ‘Trading in and Developing UK Land’ rules, they will now incur negligible one off costs of familiarisation with the new rules, calculating the tax due and submitting a UK tax return to HM Revenue and Customs (HMRC). It is not expected that there will be any on-going costs as the measure only relates to existing contracts. These businesses will also pay more tax as they will now be subject to Corporation Tax and Income Tax on any profits. There is no impact on civil society organisations.
Operational impact (£m) (HMRC or other)
It is not anticipated that implementing this change will incur any additional costs or savings for HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns and communications with affected taxpayers and practitioners.
Further advice
If you have any questions about this change, contact Paul Boyle on Telephone: 03000 541806 or email: paul.boyle@hmrc.gov.uk.