Transactions in Land (from March 2016)

Can the rules apply to incorporation?

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Hopefully this will be a quick answer. When we have an individual holding a property and they incorporate it into a company with the intention that the company will develop it and sell it one, could the gain arising on the initial transfer into the company be subject to income tax under the new rules? I assume not but cannot find an example on the subject....

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By Portia Nina Levin
11th Jan 2018 10:28

What does "and they incorporate it {a piece of land] into a company" mean? Land cannot become a company.

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Replying to Portia Nina Levin:
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By TaxGeek198
11th Jan 2018 13:58

Sorry, is it not obvious what I meant? They are transferring land into a company. I thought that would be clear from the phrasing.

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By Justin Bryant
11th Jan 2018 10:59

This is yet another question where the staring point is the trading/investment intention of the vendor, not the new rules (which are not much different to the old rules). If you read the relevant case law, the holding of land without rental income for future gain only can be capital and IMHO the new rules should not cause that to be income (but the explanation is detailed).

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Replying to Justin Bryant:
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By TaxGeek198
11th Jan 2018 14:01

I agree with you, the intention of the vendor is the important point here. They have obtained planning permission (although this was some time ago, apparently) although I do not believe that this affects anything particularly as they weren't sure what they were doing with it. They now intend to develop it, but are choosing to develop it in a company.

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paddle steamer
By DJKL
11th Jan 2018 20:08

Seems to me their intention is likely trading as certainly is the company's, any background on the history of the individuals and the property to consider?

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