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HMRC internal manual

Business Income Manual

Builders, property dealers & developers: income recognition: valuation of mortgage

Where a builder sells a property and takes a mortgage in respect of a part or the whole of the purchase price, the amount of the trading receipt will be the sum of any money received and the value of the mortgage. Normally this will be the full market value.

However, if the mortgage is a second mortgage, or if it is a first mortgage and, exceptionally, it fails to provide full security for the debt after taking account of:

  • the current and future vacant possession value of the property,
  • the current and future credit-worthiness of the mortgagor, and
  • any other factors which expose repayment of the debt to risk,

its value may be a lesser amount.