The problem of distinguishing between capital and revenue transactions is invariably more difficult in relation to land, because, perhaps more so than most other assets, it can constitute either an investment or trading stock. The following relate to cases where a company has been formed to deal with the realisation of land acquired from trustees. In most cases the company was found to be trading which is the view HMRC hold if a company is formed with the intention of realising assets, see BIM20290.
In St Aubyn Estates Ltd1, a company was incorporated to purchase the land and funds subject to a settlement. The sale was by the tenant for life; all the preference shares were issued to him and all the ordinary shares to the settlement trustees. The company also purchased a small neighbouring property with a view to the development of the main estate.
The company developed a part of the land as building sites and sold off plots as opportunity arose. Other areas were let out as building sites and
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