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HMRC internal manual

Business Income Manual

From
HM Revenue & Customs
Updated
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Builders, property dealers & developers: Town and Country Planning Acts

Compensation received by a builder under any of the Town and Country Planning Acts for such events as the compulsory acquisition of land, the refusal or revocation of planning permission, or the granting of such permission subject to conditions, should be dealt with as follows:

  • Where land is held as a fixed asset, any compensation received in respect of the land is not a trade receipt. As regards the treatment of the cost of professional advice, see BIM46400 onwards.
  • Where land is held as trading stock, the compensation should be treated as a trading receipt on the date on which the amount payable under the claim for compensation is determined, that being the date on which an asset analogous to a trading debt comes into existence (see Johnson v W S Try Ltd [1946] 27TC167).

Where the right to receive compensation is sold or assigned in a case in which land is held as trading stock, the proceeds of the sale etc, whether represented by money or money’s worth, should be treated as a trade receipt when received.