This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Business Income Manual

Profits from a trade of dealing in or developing UK land: Anti-fragmentation: Fragmented activities rules

The fragmented activities rules apply where all of the following conditions are met:

  • A company (‘C’) or a person chargeable to income tax (‘P’) disposes of land in the UK,
  • Any of conditions A to D in S356OB CTA 2010 or S517B ITA 2007 are met in relation to that land, and
  • A person (‘R’) who is associated with C/P at a relevant time has made a relevant contribution to:
    • The development of land.
    • Any other activities directed towards realising a profit or gain from the disposal of the land.


Where the fragmented activities rules apply, C/P and R will be considered as though they were the same person. This means, any profit or gain realised by C/P will be calculated as if C/P and R were one.

The fragmentation rules will apply when C realises a profit or gain on the disposal of land. This means that C/P would be taxed on R’s contributions at this point. If any of those contributions have already been taxed in the UK, HMRC would not look to tax them again.

Only profits of R that are directly attributable to C/P are taxed in that entity, while R’s other [unrelated] profits remain taxable in R.

Where any amount is paid by R to C/P for the purpose of meeting or reimbursing the cost of corporation tax or income tax which C/P is liable to pay as a result of this rule:

  • The amount will not be taken into account in calculating profits or losses of R or C/P for the purposes of income tax or corporation tax; and
  • Will not for any purpose of the Corporation Tax Acts be regarded as a distribution.