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HMRC internal manual

Business Income Manual

Measuring the profits (particular trades): land: trading transactions: acquisition and disposal of superior interest: marriage value

Where a tenant acquires and resells a superior interest in land, our argument is:

  • such transactions involve two separate assets - the tenancy and the freehold,
  • the tenancy is a capital asset and any gain on that asset will be a capital gain,
  • the freehold was not acquired with the intention to retain but to sell at profit,
  • the freehold was therefore never part of the purchaser’s capital structure and is not consequently a capital asset,
  • it is the profit on the freehold alone that we wish to isolate and tax as the profit of an adventure in the nature of trade,
  • that profit is part of a marriage profit which is generated when the tenancy and the freehold merge.