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HMRC internal manual

Capital Gains Manual

Europe: grubbing up scheme: what this guidance is about

This guidance tells you about the Capital Gains Tax treatment of land which has been `grubbed up’.

Under this scheme apple growers may receive grants in respect of any trees they `grub-up’, or, in other words, dig up. Such grants are not treated as income in the grower’s hands, see BIM55165. They may, however, attract Capital Gains Tax liability.

Grants under the grubbing-up scheme are capital sums derived from land, TCGA92/S22. This means that the receipt of a grant will be treated as a part-disposal for Capital Gains Tax purposes, see CG12940+.

Small disposals and claims under TCGA92/S23 (1)

If the receipt is small the recipient may claim to have the payment deducted from the cost of the land, TCGA92/S23 (1)(c). This will have the effect of deferring any tax charge until any later disposal of the land, see CG71870+ You should regard small as meaning the same as in TCGA92/S122, see CG57836.

TCGA92/S23 (1)

If the recipient is not entitled to, or chooses not to, make such a claim, the amount of the gain will be computed under the normal part-disposal rules, TCGA92/S42, see CG12730+. The recipient is entitled to offset part of the cost of the land against the grant received and to a deduction for the costs of grubbing-up.

If a Section 23 (1)(c) claim has not been made and a gain arises on the part disposal, then roll-over relief, TCGA92/S152 - TCGA92/S158, will be available if the consideration received is invested in replacement business assets. The gain will have arisen from a disposal of land which has been occupied and used for the purposes of the grower’s trade.

Where the land which has been grubbed up is subsequently disposed of, the availability of roll-over relief will depend on the use, if any, to which the land has been put after grubbing up.