BIM60650 - Profits from a trade of dealing in or developing UK land 'Slice of the action' contracts: Portion of gain relating to period before relevant activities commenced may be exempt

In a ‘slice of the action’ contract the following legislation may be relevant:

• Section 356OL CTA 2010 (for corporation tax)
• Section 517L ITA 2007 (for income tax)

Where either of these sections is in point the portion of the gain attributable to the period prior to the intention being formed may be exempted from the transactions in UK land rules.

Any gain which has accrued whilst the land functioned as a capital asset will not therefore be charged to income tax or corporation tax income under the transactions in UK land rules. Only the gain arising after the intention to develop has been formed will be taxed as income under those rules.

The ‘first intention date’ is a question of fact, which should, if possible, be agreed at an early stage in any enquiry. It is expected to be the date at which it was first intended that the land would be developed or sold, for the purpose of subsequent development. When the ‘first intention date’ has been established you should obtain a valuation of the land from the District Valuer at that date.

CG72856 deals with the taxation of the gain attributable to the period before the intention to develop the land was formed.