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HMRC internal manual

Business Income Manual

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

BIM60095 envisages principally a situation where the tenant acquiring the freehold sells all of the land of which he or she owns the freehold.

The trading argument may be weaker where only part of the land is sold. This may occur for example when a tenant farmer buys the freehold of the farm but sells off the farmhouse and ‘garden’ retaining the agricultural land.

The trading argument may be weaker because the purpose of the acquisition of the freehold is less likely to have been for disposal of the land by way of a trading transaction. More probably it will have been to acquire a capital asset for the existing (farming) trade, the subsequent sale of part being merely a rationalisation of the land holding.

Each case will depend on its own facts but the smaller the part subsequently disposed of the weaker the trading argument becomes.

Please submit cases of doubt or difficulty to CTISA.