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Interest on development

Interest on development

A property bought, extended and sold immediately. One-off development. Capital gains tax is payable. Is the interest paid on the borrowing for the property purchase and development costs capitalised and allowable against the gain?



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15th Oct 2008 11:49

A capital gain? Are you sure?
Bought, extended and sold immediately? So presumably acquired with the sole intention to develop and sell - and financed by borrowings, to be repaid on sale. Sounds like an adventure in the nature of trade to me - so taxable as trading income rather than a capital gain. Or possibly taxable under s755 ITA 2007 but HMRC would only invoke that if they can't justify trading.

Enhancement costs would be allowable for a capital gain - but not interest on borrowings. Interest would be allowable if it is taxed as trading income - and also under s755 - as trading principles are applied.


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