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HMRC internal manual

Business Income Manual

Builders, property dealers & developers: income recognition: ground rents: trading stock

Where a trader grants a lease of land for a period of years in return for payment of a premium, he partly realises the value of his interest in the land but does not dispose of it. The interest retained, commonly referred to as a ground rent, should continue to be dealt with as trading stock and its cost, or if lower its estimated selling price less costs to complete and sell, brought into account accordingly (see BIM51540).

Any subsequent sale of the interest subject to the lease should be treated as giving rise to a trading receipt.

If such an asset is still owned when the trade ceases, the provisions for dealing with the valuation of stock on discontinuance apply. See BIM33450 onwards.