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HMRC internal manual

Business Income Manual

Measuring the profits (particular trades): land: profits arising out of land

S12 Income Tax (Trading and Other Income) Act 2005, S39 Corporation Tax Act 2009

Profits and losses arising out of land made by certain concerns are calculated and charged to tax as if the concern were a trade. The concerns are:

  1. mines and quarries, including gravel pits, sand pits and brickfields;
  2. ironworks, gasworks, salt springs or works, alum mines or works, waterworks and streams of water;
  3. canals, inland navigation, docks and drains or levels;
  4. rights of fishing;
  5. rights of markets and fairs, tolls, bridges and ferries;
  6. railways and other kinds of way;
  7. a concern of the same kind as one specified in (b), (c) ,(d) or (e) above.

In order for such a concern to be treated as a trade, it is not necessary to prove that a trade (or venture in the nature of trade) is being carried on; it is sufficient that:

  1. the commodity or service derived from the land is supplied (whether in a raw state or after processing) to persons other than the owner and a charge is made for it;
  2. there is ‘an adequate degree of business organisation for the purpose of carrying on the undertaking’ (see Scott v Russell [1948] 30TC394 at page 421); and
  3. the revenue arises from the ownership or occupation of land (see CIR v Forth Conservancy Board [1928] 14TC709).

If the revenue does not arise from the ownership or occupation of land (for example, where tolls or dues are collected solely by virtue of a Charter or Act of Parliament), the profits should be charged as miscellaneous income unless, exceptionally, they can be regarded as the profits of a trade (see CIR v Forth Conservancy Board [1931] 16TC103).

Further guidance about mines and collieries can be found at BIM62000 onwards.