By Tolley

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Land
  • Part disposals
  • Compulsory acquisition
  • Other points to consider

If an individual sells land (which includes buildings and any estate or interest in land or buildings), on first principles it will be taxable as either:

  • trading income (if it is an adventure in the nature of trade), or
  • a capital gain (but see anti-avoidance below)

For a discussion of when a sale of land or buildings could be considered to be trading income, see the Application of the badges of trade guidance note. The rules on treating the sale as trading income have priority over the capital gains tax treatment discussed in this guidance note.

However, what if the sale of land is not considered an adventure in the nature of trade but it is still a sale with the intention of making a profit similar to that of a property dealer? This is where the transactions in land anti-avoidance provision bites to treat the gain as income. The conditions and the types of situation caught by this anti-avoidance provision are discussed in detail in the Transactions in land guidance note.

This guidance note explains the various types of part disposal associated with land. Guidance notes on topics associated with the disposal of land but not specifically covered within this note are listed below in ‘other points to consider’.

When calculating the capital gain or loss, you should take account of the HMRC ‘Capital gains tax for land and buildings’  toolkit. The aim of the toolkit is to prevent common errors made by practitioners in the capital gains tax reporting of disposals of land and buildings.

Part disposals

When a taxpayer makes a disposal of part of his holding of land, you need to consider the following provisions in order to report the sale correctly.

More on Capital gains summary: