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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Builders, property dealers & developers: property not acquired as trading stock

Where property is acquired otherwise than by purchase for trading purposes (for example, by inheritance or gift or by purchase for the purpose of investment), profits on sale are not ordinarily trade profits, unless its development and preparation for sale is such as to indicate that the transactions are operations in the nature of trade, or there are grounds for regarding the property as having been brought into an existing or new trade.

Trading generally requires an intention to trade, but intentions may be changed. An asset cannot be at the same time both trading stock and capital investment nor possess an indeterminate status being neither one thing nor the other (see Lionel Simmons Properties Ltd v CIR [1980] 53TC461).

Regard should be had to all the facts, and in particular to the guidance in BIM60000onwards. (See Hudson’s Bay Co Ltd v Stevens [1909] 5TC424; Rand v Alberni Land Company Limited [1920] 7TC629; Williams v Davies 26TC371; Taylor v Good [1974] 49TC277; and, in contrast, Alabama Coal Co Ltd v Mylam [1926] 11TC232; Balgownie Land Trust Ltd v CIR [1929] 14TC684; Pilkington v Randall [1966] 42TC662.)