B5.255 Profits from dealing in and developing UK land
Finance Act 2016 introduced rules that are designed primarily to ensure offshore property developers are taxed on their UK profits arising from a trade which involves either dealing in or developing UK land1, but which in fact apply to both resident and non-resident companies and individuals carrying on such a trade either directly or indirectly. As a consequence, the previous transactions in land legislation (CTA 2010, ss 815–833 (Pt 18) and ITA 2007, ss 752–772 (Pt 13, Ch 3), see B5.235–B5.246) is repealed and replaced by this legislation. The trading profits are calculated under normal computational rules in CTA 2009, ss 34–201 (Pt 3) or ITTOIA 2005, ss 3–259 (Pt 2)2 (see Division B2.1). All references to profits or gains also apply in situations where there is a loss3.
For HMRC to ensure overseas developers are taxed, such traders must be unable to claim relief under a double tax treaty, so at the same time as announcing the changes to the domestic legislation, the UK's treaties with Jersey, Guernsey and the Isle of Man were amended to ensure that the UK now has the relevant taxing rights over its own land. The UK's other double tax treaties preserve the UK's taxing rights over land in the UK and are therefore in line with the changes.
The purpose of this legislation is to target arrangements whereby structures were set up with the intention of shielding (through