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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Measuring the profits (particular trades): land: trading transactions: summary

Determining whether a trade exists is often a matter of applying principles to the detailed facts. Each case will depend on its own detailed facts (BIM60020).

The most important cases in this area are summarised at BIM60160.

One of the main issues will be whether there is an intention to trade when the land is acquired. In order to establish a trade you will have to demonstrate an intention to trade (BIM60030).

Even if the taxpayer denies having such an intention, the presence of the ‘badges of trade’ may support the contrary argument (BIM60025).

A trading transaction is more likely to be characterised as a ‘deal’ rather than an investment (BIM60040).

It is very important to establish all the relevant facts (BIM60015).Where the dispute proceeds to a contentious hearing, the Tribunal’s decision is normally final as appeals are only permissible on points of law (BIM60020).

Tribunals can properly take different views of essentially similar facts. Accordingly, it can be difficult to forecast the result with any degree of certainty.

Whether a loss making transaction is a trading transaction is determined by applying the same principles as for profitable transactions (BIM60085).

Land transactions can give rise to difficult taxation problems. Any uncertainty that you feel about the ‘correct treatment’ of a transaction, and likely outcome of a case, will be shared by the other party concerned.

If the purchase and resale is not a trading transaction the disposal will give rise to a capital receipt, which cannot therefore be taxable as miscellaneous income (Leeming v Jones [1930] 15TC333).