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HMRC internal manual

Business Income Manual

Measuring the profits (particular trades): land: trading transactions: timeshare schemes: non builders

S57 Income Tax (Trading and Other Income) Act 2005, S61 Corporation Tax Act 2009

Landowners with surplus land, developed or undeveloped (for example hotel or estate owners), will sometimes construct property, or refurbish existing property, furnish it and sell timeshares.

Whether this constitutes a trade will depend on the specific circumstances of each case in the context of the basic trading principles.

Where accommodation has been purpose built for timeshare we normally proceed on the basis that the land has been appropriated to the newly set up timeshare trade.

Where existing buildings are refurbished there is normally a tenable argument that the land has been appropriated as stock of a new trade comprising the refurbishment and improvement of property for disposal by way of granting timeshare rights.

On the other hand a landowner is entitled to enhance the value of a property in the eyes of a potential purchaser (The Hudson’s Bay Company v Stevens [1909] 5TC424) without necessarily becoming a trader.

The extent of the refurbishment, the number of units ‘sold’, the nature of management services and facilities to be provided by the landowner are all relevant.

Again each case will depend on its own facts. The basic principles at BIM60020 - BIM60085 should be considered and applied.

The date the trade commenced may have material implications for any relevant valuations of the land and the allowance of trading or pre-trading expenditure. This date is a question of fact and you should ensure that you examine the history of the project in sufficient detail to identify and, if necessary, to argue for what appears to be the appropriate date.

Please submit cases of doubt or difficulty to CTISA.