Q&As

Can an individual deduct the costs of demolishing a property and then building a block of flats in its place from any profit or gain it makes on disposal of the flats for income tax or capital gains tax purposes?

read titleRead full title
Published on LexisPSL on 16/10/2017

The following Tax Q&A provides comprehensive and up to date legal information covering:

  • Can an individual deduct the costs of demolishing a property and then building a block of flats in its place from any profit or gain it makes on disposal of the flats for income tax or capital gains tax purposes?

This Q&A refers to a UK resident and domiciled individual; a property that is not the individual’s principal private residence; and profits or gains that are generated by the disposal of the flats after construction.

The tax treatment of property development costs and returns depends heavily on whether the person is trading or investing in land.

This question is considered in detail in Practice Note: Dealing in property or property investment? Factors that need to be taken into account in determining whether a particular individual is trading or investing include:

  1. whether there have been any previous transactions in land, their frequency and the intervals between them

  2. whether there was intention at the time of the acquisition of the land:

    1. to develop and sell it on

    2. to keep it for own use, or

    3. to keep it in order to generate income

    and whether that intention has changed over time

  3. whether the transaction is structured in a manner typical of a property dealer

Where there has been a change of intention, a property that was ac

Related documents:

Popular documents