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Property development

A client purchased a property in about May 2011, let it for a few months, and obtained a planning permission to demolish an existing wooden building and construct a new, larger one. The construction work is well in progress. She intends to sell the developed property and recons she will make a huge profit. She has never been involved in property development prior to this, and owns another property which she lets.

Should the development be regarded as trade? If so, should she register as self-employed and pay Class 2 and 4 NIC? Or would it be liable to income tax under TA 2007 s.756?

Thank you for your views.

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Having let the property points towards this being a CGT issue unless it was her intention from the outset to develope the property and sell it in which case IT would apply. Difficult without the facts. Regards Peter

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More clarification, please

Was the "existing wooden building" the only building on the property which was let or was it an additional building, perhaps a wooden chalet, in the garden of the let building?  If the latter, it points to trade and IT.

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Thanks for asking.

The existing wooden building was a Swedish house.  It stood in a very large garden.  It was perfectly habitable and let before demolition.

The grounds have been divided into two and two new buildings are constructed, one intended to be the client's residence (a main residence election expected), the other will be (all being well) sold.

 

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