Where a company can demonstrate that it is engaged in a trade related to land dealing/ development rather than buying property as an 'investment', it may qualify for the 12.5% corporation tax rate on its profits realized on the sale of the property.
The fundamental test to determine whether a trade of property development/dealing is being carried on is the motive for acquiring the property and the ability of the company to evidence that motive.
Broadly speaking, a property is acquired as an investment if it is acquired in order to generate rental income either immediately or in the future and to generate long-term capital growth. A property will be acquired as trading stock, and transaction classified as trading/ dealing if it is acquired in order to make a profit from reselling it.
Guidance as to what constitutes trading has been drawn from case law and from
To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to Tolley+™ Research or register for a free trial
Web page updated on 17 Mar 2025 13:17