C2.1117 Part disposal of land to authority with compulsory powers
Certain disposals of part of a holding of land to an authority exercising or having compulsory powers may be subject to special tax treatment. Instead of treating the disposal as a part disposal, the landowner (termed the 'transferor' in the legislation) can make a claim to deduct the consideration received from the acquiring authority from the allowable expenditure (ie acquisition costs plus enhancement expenditure) of the holding of land. This reduces the allowable expenditure available to be deducted on a future disposal1. For the position where the consideration received exceeds the allowable expenditure of the land, see below.
For this special tax treatment to be available2:
• the consideration for the transfer (or, if the transfer is not for full consideration, the market value of the land transferred) must be 'small', as compared with the market value of the holding as it existed before the transfer, and
• the transferor must have taken no steps, by advertising or otherwise, to dispose of any part of the holding, or to make their willingness to dispose of it known to the authority or others
In practice, HMRC usually ignores any steps taken by the transferor more than three years before the compulsory acquisition in question3.
For a detailed discussion of allowable expenditure, see Division C2.2.
It is not necessary that the authority exercises its compulsory powers; it is only necessary that the authority has such powers4. This was discussed in Ahad5 in the context of rollover
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