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HMRC internal manual

Business Income Manual

Measuring the profits (particular trades): land: trading transactions: intention on acquisition

The purchaser’s intention at the moment of acquisition of the land is of great importance. In Lionel Simmons Properties Ltd v CIR [1980] 53TC461, Lord Wilberforce said at page 491:

‘Trading requires an intention to trade: normally the question to be asked is whether this intention existed at the time of the acquisition of the asset’.

It is therefore often necessary to demonstrate an intention to trade at the time of acquisition. For land transactions, the exchange of contracts is the moment when the property is acquired. The formal transfer of property or completion follows within a month of completion but is sometimes delayed for commercial, or tax planning reasons.