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HMRC internal manual

Business Income Manual

From
HM Revenue & Customs
Updated
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Builders, property dealers & developers: private street works: payments to local authorities

An amount paid (or security given) under BIM51645 in respect of land which is held as a fixed asset should not be allowed as a trade expense.

Where the land is held as trading stock, a payment under BIM51645 should be allowed as a trade expense at the time the payment is made and should be taken into account in any subsequent valuation of the land as trading stock.

Where the estimated cost of the street works is merely secured to the local authority, no allowance should be made until the security is realised. At that date, the amount realised (or so much of it as is retained by the local authority to meet the actual cost of the street works) should be allowed as a trade expense and should be taken into account in valuing trading stock.

Where, in any case in which the land is held as trading stock, the payment under BIM51645 proves to be in excess of the actual cost of the street works, the refund should be credited in the trader’s accounts at the time it is made and, where necessary, the value of the trading stock adjusted. Where the payment (or the amount realised from the security) proves to be less than the actual cost of the street works, the further amount paid by the trader should be allowed as a trade expense at the time it is paid and, where necessary, the value of trading stock adjusted.