Transactions in UK land definition

trænˈzækʃənz ɪn juː keɪ lænd
tag icontax

What does Transactions in UK land mean?

Also known as transactions in land.

Transactions in UK land in a nutshell

The transactions in UK land rules were introduced in 2016, replacing the old transactions in land rules. They must be considered where a taxpayer disposes of UK land.

Normally on disposal, the choice is between treating the proceeds as trading income (where the sale is part of the taxpayer’s trade or it is a venture in the nature of trade) or as capital consideration. The transactions in UK land rules must be considered where the disposal is not a trade or venture in the nature of trade, but the property was purchased or developed with the intention of making a profit similar to that of a property dealer. If caught by these rules, the disposal proceeds are taxed as trading income.

Which taxpayers are caught by the transactions in UK land rules?

The transactions in UK land rules apply to ‘persons’, which is widely defined. It includes individuals, personal representatives, trustees and companies. The rules apply to UK residents and UK non-residents. In fact, the driver for the rewriting of the old transactions in land provisions in 2016 was to ensure that non-residents would be caught by the anti-avoidance rules as well as residents.

What disposals are caught by the transactions in UK land rules? 

The rules relate to two types of disposals:

  • disposals of UK land (whether direct or via a series of transactions)
  • disposals of assets deriving at least 50% of their value from UK land (eg shares in a company which holds UK land)

For these purposes, land includes buildings and structures, a right or interest in land and any land covered by water.

Where the asset subject to disposal is one that derives at least 50% of its value from UK land or buildings, the amount charged to income tax is the amount of the profit attributable to that land as determined on a just and reasonable basis.

What are the transactions in UK land conditions?

The conditions depend on whether the disposal is of UK land or an asset deriving at least 50% of its value from UK land.

The transactions in UK land provisions apply to disposals of UK land by a person that acquires, holds or develops UK land (or is associated with such a person) if any of the conditions below are met:

  • the main purpose, or one of the main purposes, of acquiring the land is to realise a profit on disposal
  • the main purpose, or one of the main purposes, of acquiring any property deriving its value from land is to realise a profit on disposal
  • the land is held as trading stock (this condition is aimed at non-residents developing UK property), or
  • the main purpose, or one of the main purposes, of developing the land was to realise a profit on disposal

The transactions in UK land provisions apply to disposals of assets that derive at least 50% of their value from UK land if both of the following conditions are met:

  • the person is party to or concerned with an arrangement relating to that land, and
  • the main purpose, or one of the main purposes of the arrangement, is to deal in or develop that land and realise a profit on the disposal of the asset

There is an anti-avoidance rule that applies if the person enters into any arrangements where the purpose, or one of the main purposes, is to avoid the tax charge under the transactions in UK land rules.

Are there any exemptions?

There are two exemptions from the transactions in UK land rules.

Where the transactions in UK land rules apply because the land is developed for the purpose of making a profit, the amount of the profit that arises before the intention to develop the land was formed is exempt.

The disposal is of the person’s principal private residence (PPR) is exempt from the transaction in UK land rules, even if PPR relief is denied due to the dwelling having been acquired with the intention of making a gain. The principal private residence rules apply to individuals, trustees and personal representatives.

How is the trading income calculated?

Where the profit is taxable as trading income under these rules, the amount of the profit is calculated in accordance with the trading income rules for income tax or corporation tax as appropriate.

Where only part of the profit on the transaction is taxable as trading income, the proceeds need to be split between the trading income portion and the gain portion. This is relevant if the exemption regarding the amount of the profit that arises before the intention to develop the land was formed applies or the asset derives at least 50% of its value from UK land (since any proportion of the value not derived from UK is treated as a gain).

What if a loss arises?

Where a loss is realised, the amount that falls within the transactions in UK land rules is treated as a trading loss and will be subject to the normal trading loss relief rules.

How does it interact with other provisions?

It is possible that the disposal could be caught under both the transactions in UK land rules and the non-resident capital gains tax (NRCGT) rules. Where this is the case, the transactions in UK land rules take precedence.

Transactions in UK land explained

The transactions in UK land rules were introduced in 2016, replacing the old transactions in land rules. They must be considered where a taxpayer disposes of UK land.

Related documents:

Glossary terms:

Jump to letter down arrow icon
#
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z

Related documents:

Glossary terms:

Jump to letter down arrow icon
#
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
Popular documents