Property developers—direct taxation of trading in UK property
Produced in partnership with Charles Goddard of Rosetta Tax

The following Tax practice note produced in partnership with Charles Goddard of Rosetta Tax provides comprehensive and up to date legal information covering:

  • Property developers—direct taxation of trading in UK property
  • Trading vs investment
  • Badges of trade
  • Example one—residential development
  • Example two—commercial development
  • Example three—mixed use development
  • Taxation of profits of the trade
  • Deductibility of financing expenses
  • Other expenses
  • Property developers, the annual tax on enveloped dwellings and capital gains tax
  • More...

Property developers—direct taxation of trading in UK property

A key concern for those engaged in a trade of developing property situated in the UK is the imposition of UK taxation on the profits of that trade. This Practice Note looks at what constitutes such a trade, and the charge to UK corporation tax and income tax on trading profits.

In this Practice Note, CGT means both capital gains tax and corporation tax on chargeable gains.

Trading vs investment

For companies subject to corporation tax, the corporation tax rules that apply to the profits of trades generally apply also to the profits of a trade of property dealing and development. The specific rules which apply to profits from trading in and developing UK land (from 5 July 2016) do not apply where the relevant profit or gain would already be brought into account as income for corporation tax purposes. For more details, see Practice Note: Profits from trading in and developing UK land (transactions in UK land).

The corporation tax rules applying to trading profits are separate from those applying to the profits of a property business, which is the business of exploiting any interest in or right over land as a source of rents or similar payments. For more details, see Practice Note: Property income—the corporation tax charge.

Similar principles apply for income tax purposes. Separate income tax rules apply

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