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HMRC internal manual

Business Income Manual

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

S34(1)(a), S172B Income Tax (Trading and Other Income) Act 2005

A house built by an unincorporated builder, for his or her own occupation, and so used, does not become stock of the trade. The only adjustment required in calculating the trade profits in such a case is the disallowance of the cost of construction as not incurred wholly and exclusively for the purposes of the trade. On the other hand, a house built and offered for sale by a builder in the ordinary course of their business is trading stock. Where such a house is taken for private occupation, an amount equal to the market value of the house is treated as a trade receipt.

In practice, many cases fall between these two extremes and should be dealt with by determining the extent to which the house and land can be regarded as trading stock. For example, a private residence built on land held as trading stock would give rise to a trade receipt in respect of the land alone.