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Income Tax Bill


Income Tax Bill
Part 13 — Tax avoidance
Chapter 3 — Transactions in land

382

 

Charge on gains from transactions in land

755     

Charge to tax on gains from transactions in land

(1)   

Income tax is charged on income treated as arising under section 756 (income

treated as arising when gains obtained from some land disposals).

(2)   

For exemptions from the charge, see—

5

section 765 (exemption: gain attributable to period before intention to

develop formed),

section 766 (exemption: disposals of shares in companies holding land as

trading stock), and

section 767 (exemption: private residences).

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756     

Income treated as arising when gains obtained from some land disposals

(1)   

This section applies if—

(a)   

any of the conditions specified in subsection (3) is met as respects land,

(b)   

a gain of a capital nature is obtained from the disposal of all or part of

the land,

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(c)   

all or part of the land is situated in the United Kingdom, and

(d)   

a person within section 757(1)(a), (b) or (c) obtains the gain.

(2)   

The gain is treated for income tax purposes as income arising when the gain is

realised.

(3)   

The conditions are that—

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(a)   

the land is acquired with the sole or main object of realising a gain from

disposing of all or part of the land,

(b)   

any property deriving its value from the land is acquired with the sole

or main object of realising a gain from disposing of all or part of the

land,

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(c)   

the land is held as trading stock, and

(d)   

the land is developed with the sole or main object of realising a gain

from disposing of all or part of the land when developed.

(4)   

It does not matter for the purposes of this section whether the person within

section 757(1)(a), (b) or (c) obtains the gain for that person or another person.

30

(5)   

For the purposes of this section, if, for example by a premature sale, a person

(“A”) directly or indirectly transmits the opportunity of realising a gain to

another person (“B”), A obtains B’s gain for B.

(6)   

For the meaning of “another person”, see section 763.

757     

Person obtaining gain

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(1)   

The persons referred to in section 756(1)(d) are—

(a)   

the person acquiring, holding or developing the land,

(b)   

a person connected with a person within paragraph (a), and

(c)   

a person who is a party to, or concerned in, an arrangement or scheme

within subsection (2).

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(2)   

An arrangement or scheme is within this subsection if—

 
 

Income Tax Bill
Part 13 — Tax avoidance
Chapter 3 — Transactions in land

383

 

(a)   

it is effected as respects all or part of the land, and

(b)   

it enables a gain to be realised—

(i)   

by any indirect method, or

(ii)   

by any series of transactions.

(3)   

For the purposes of this section any number of transactions may be regarded

5

as constituting a single arrangement or scheme if—

(a)   

a common purpose can be discerned in them, or

(b)   

there is other sufficient evidence of a common purpose.

758     

Income charged

(1)   

Tax is charged under this Chapter on the full amount of income treated as

10

arising in the tax year.

(2)   

See section 760 (method of calculating gain) for how to calculate the amount of

income charged.

759     

Person liable

(1)   

The person liable for any tax charged under this Chapter on income is the

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person whose income it is.

(2)   

The general rule is that that person is the person who realises the gain.

(3)   

But that rule is subject to subsections (4) and (6).

(4)   

If all or any part of the gain accruing to a person (“A”) is derived from value

provided directly or indirectly by another person (“B”), the income is B’s.

20

(5)   

Subsection (4) applies whether or not the value is put at the disposal of A.

(6)   

If all or any part of the gain accruing to a person is derived from an opportunity

of realising a gain provided directly or indirectly by another person, the

income is the other person’s.

(7)   

For the meaning of “another person”, see section 763.

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(8)   

In applying section 1015 (territorial scope of charges including the charge

under this Chapter) for the purposes of this Chapter, an amount treated as

arising to a non-UK resident under section 756 is treated as being from a source

in the United Kingdom so far (and only so far) as the land to which the disposal

relates is in the United Kingdom.

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760     

Method of calculating gain

(1)   

Subsections (3) to (5) apply for calculating a gain for the purposes of this

Chapter.

(2)   

But, except so far as those subsections make provision, such method is to be

used for those purposes as is just and reasonable in the circumstances.

35

(3)   

The method must—

(a)   

take into account the value of what is obtained for disposing of the

land, and

(b)   

allow only such expenses as are attributable to the land disposed of.

 
 

Income Tax Bill
Part 13 — Tax avoidance
Chapter 3 — Transactions in land

384

 

(4)   

If a freehold is acquired and on disposal the reversion is retained, account may

be taken of the way in which trading profits are calculated in such a case.

(5)   

Account may be taken of the adjustments to be made in calculating trading

profits under section 158 of ITTOIA 2005 (lease premiums etc: reduction of

receipts).

5

(6)   

In this section “trading profits” means the profits under Part 2 of ITTOIA 2005

(trading profits) of a person dealing in land.

(7)   

In the application of this section in Scotland—

“freehold” means the interest of the owner, and

“reversion” means the interest of the landlord in property subject to a

10

lease.

(8)   

See also section 764 (valuations and apportionments).

Further provisions relevant to the charge

761     

Transactions, arrangements, sales and realisations relevant for Chapter

(1)   

For the purposes of this Chapter, account is to be taken of any method,

15

however indirect, by which—

(a)   

any property or right is transferred or transmitted, or

(b)   

the value of any property or right is enhanced or diminished.

(2)   

Accordingly—

(a)   

the occasion of the transfer or transmission of any property or right

20

however indirect, and

(b)   

the occasion when the value of any property or right is enhanced,

   

may be an occasion when tax is charged under this Chapter.

(3)   

Subsections (1) and (2) apply in particular—

(a)   

to sales, contracts and other transactions made otherwise than for full

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consideration or for more than full consideration,

(b)   

to any method by which any property or right, or the control of any

property or right, is transferred or transmitted by assigning—

(i)   

share capital or other rights in a company,

(ii)   

rights in a partnership, or

30

(iii)   

an interest in settled property,

(c)   

to the creation of an option affecting the disposition of any property or

right and the giving of consideration for granting it,

(d)   

to the creation of a requirement for consent affecting such a disposition

and the giving of consideration for granting it,

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(e)   

to the creation of an embargo affecting such a disposition and the

giving of consideration for releasing it, and

(f)   

to the disposal of any property or right on the winding up, dissolution

or termination of a company, partnership or trust.

762     

Tracing value

40

(1)   

This section applies if it is necessary to determine the extent to which the value

of any property or right is derived from any other property or right for the

purposes of this Chapter.

 
 

Income Tax Bill
Part 13 — Tax avoidance
Chapter 3 — Transactions in land

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(2)   

Value may be traced through any number of companies, partnerships and

trusts.

(3)   

The property held by a company, partnership or trust must be attributed to the

shareholders, partners or beneficiaries at each stage in such manner as is

appropriate in the circumstances.

5

763     

Meaning of “another person”

(1)   

For the purposes of this Chapter references to other persons are to be read in

accordance with subsections (2) to (4).

(2)   

A partnership or partners in a partnership may be regarded as a person or

persons distinct from the individuals or other persons who are for the time

10

being partners.

(3)   

The trustees of settled property may be regarded as persons distinct from the

individuals or other persons who are for the time being the trustees.

(4)   

Personal representatives may be regarded as persons distinct from the

individuals or other persons who are for the time being personal

15

representatives.

764     

Valuations and apportionments

(1)   

All such valuations are to be made as are appropriate to give effect to this

Chapter.

(2)   

For the purposes of this Chapter, any expenditure, receipt, consideration or

20

other amount may be apportioned by such method as is just and reasonable in

the circumstances.

Exemptions

765     

Exemption: gain attributable to period before intention to develop formed

(1)   

This section applies if—

25

(a)   

income is treated as arising because the condition mentioned in section

756(3)(d) is met (land developed with sole or main object of realising a

gain from its disposal when developed), and

(b)   

part of the income is fairly attributable to a period before the intention

to develop was formed.

30

(2)   

No liability to income tax arises under this Chapter in respect of that part of the

income.

(3)   

In applying this section account must be taken of the treatment under Part 2 of

ITTOIA 2005 (trading profits) of a person who appropriates land as trading

stock.

35

766     

Exemption: disposals of shares in companies holding land as trading stock

(1)   

No liability to income tax arises under this Chapter in respect of a gain on

property deriving value from land if—

(a)   

the gain is obtained by the holder of shares,

 
 

Income Tax Bill
Part 13 — Tax avoidance
Chapter 3 — Transactions in land

386

 

(b)   

the gain arises as a result of the holder of shares falling within section

757(1)(a) or (b) (persons acquiring, holding or developing land and

connected persons), and

(c)   

the circumstances are such as are mentioned in subsections (2) and (3).

(2)   

The gain arises on a disposal of shares in—

5

(a)   

a company which holds that land as trading stock, or

(b)   

a company which directly or indirectly owns at least 90% of the

ordinary share capital of another company which itself holds that land

as trading stock.

(3)   

All the land so held is disposed of—

10

(a)   

in the normal course of its trade by the company which holds it, and

(b)   

so as to procure that all opportunity of profit in respect of the land

arises to that company.

(4)   

This section does not affect any liability as a result of any person falling within

section 757(1)(c) (parties to arrangements and schemes, etc).

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767     

Exemption: private residences

No liability to income tax arises under this Chapter in respect of a gain accruing

to an individual if—

(a)   

the gain is exempt from capital gains tax as a result of sections 222 to

226 of TCGA 1992 (private residences), or

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(b)   

it would be so exempt but for section 224(3) of that Act (residences

acquired partly with a view to making a gain).

Recovery of tax

768     

Recovery of tax where consideration receivable by person not assessed

(1)   

This section applies if a person (“A”) is assessed to tax under this Chapter in

25

respect of consideration receivable by another person (“B”).

(2)   

Consideration is not regarded as having become receivable by B for this

purpose until B can effectively enjoy or dispose of it.

(3)   

A is entitled to recover from B any part of the tax which A has paid.

(4)   

If any part of the tax remains unpaid at the end of the period of 6 months

30

beginning with the date when it became due and payable, it is recoverable

from B as if B were the person assessed.

(5)   

Subsection (4) does not affect the right to recover the tax from A.

(6)   

For the purposes of this section, any income which an individual is treated as

having as a result of this Chapter (the “land income”) is treated as the highest

35

part of the individual’s total income.

(7)   

But if in the tax year—

(a)   

more than one gain is treated as the individual’s land income, or

(b)   

the individual is also treated as having income as a result of Chapter 4

(sales of occupation income),

40

   

only a just and reasonable proportion of each gain treated as land income is to

be treated as the highest part of the individual’s total income.

 
 

Income Tax Bill
Part 13 — Tax avoidance
Chapter 3 — Transactions in land

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(8)   

See section 1012 for the relationship between—

(a)   

the rules in subsections (6) and (7), and

(b)   

other rules requiring particular income to be treated as the highest part

of a person’s total income.

769     

Recovery of tax: certificates of tax paid etc

5

(1)   

For the purposes of section 768(3), an officer of Revenue and Customs must, if

required to do so, produce a certificate specifying—

(a)   

the amount of income in respect of which tax has been paid, and

(b)   

the amount of tax paid.

(2)   

The certificate is conclusive evidence of any facts stated in it.

10

(3)   

See also section 944 (under which directions may be given for payments within

this Chapter to non-UK residents to be made under deduction of tax).

Clearances and power to obtain information

770     

Clearance procedure

(1)   

This section applies if a person considers that the condition mentioned in

15

section 756(3)(a), (b) or (d) may be met as respects a gain of a capital nature

which that person—

(a)   

has obtained from the disposal of land, or

(b)   

would obtain from a proposed disposal of land.

(2)   

The person may provide the Commissioners for Her Majesty’s Revenue and

20

Customs with written particulars showing how the gain has arisen or would

arise.

(3)   

The Commissioners must notify the person whether or not they are satisfied

that, in the circumstances described in the particulars, the person will not, or

would not, be liable to tax on the gain under this Chapter.

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(4)   

The notification must be given before the end of the period of 30 days

beginning with the day after that on which the particulars are received.

(5)   

A person notified by the Commissioners under this section that they are so

satisfied is not liable to income tax on the gain under this Chapter.

(6)   

A notification under this section about the Commissioners’ decision

30

concerning a gain is void if the particulars given under this section about the

gain do not make a full and accurate disclosure of all facts and considerations

relating to it which are material to the decision.

771     

Power to obtain information

(1)   

An officer of Revenue and Customs may by notice require any person to

35

provide the officer within such period as the officer may direct with such

particulars as the officer may reasonably require for the purposes of this

Chapter.

(2)   

That period must be at least 30 days.

 
 

Income Tax Bill
Part 13 — Tax avoidance
Chapter 4 — Sales of occupation income

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(3)   

The particulars which a person must provide under this section, if required to

do so by such a notice, include particulars about—

(a)   

transactions or arrangements with respect to which the person is or was

acting on behalf of others,

(b)   

transactions or arrangements which in the opinion of the officer should

5

properly be investigated for the purposes of this Chapter, although in

the person’s opinion no liability to tax arises under this Chapter, and

(c)   

whether the person has taken or is taking any part and, if so, what part

in transactions or arrangements of a description specified in the notice.

(4)   

Subsection (3) is subject to subsection (5).

10

(5)   

In relation to anything done by a solicitor on behalf of a client who does not

consent to the provision of information required to be provided by a notice

under subsection (1), the solicitor may not be compelled under this section to

do more than—

(a)   

state that the solicitor was acting on behalf of a client, and

15

(b)   

give the name and address of the client.

(6)   

A solicitor is not treated as having taken part in a transaction or arrangement

for the purposes of subsection (3)(c) merely because of giving professional

advice to a client about it.

Interpretation

20

772     

Interpretation of Chapter

(1)   

In this Chapter “capital”, in relation to a gain, means that the gain does not fall

to be included in any calculation of income for income tax purposes apart from

this Chapter.

(2)   

In this Chapter references to property deriving its value from land include—

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(a)   

any shareholding in a company deriving its value directly or indirectly

from land,

(b)   

any partnership interest deriving its value directly or indirectly from

land,

(c)   

any interest in settled property deriving its value directly or indirectly

30

from land, and

(d)   

any option, consent or embargo affecting the disposition of land.

(3)   

In this Chapter—

“company” includes any body corporate, and

“share” includes stock.

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Chapter 4

Sales of occupation income

Introduction

773     

Overview of Chapter

(1)   

This Chapter imposes a charge to income tax—

40

 
 

 
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