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What is the tax status of a land promotion fee?

Is this a capital sum derived from the land?

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It is quite common for a landowner to receive a fee for entering into a promotion agreement. This, arguably, falls within S22 TCGA 1992 as a capital sum derived from an asset and is therefore a part disposal of the land (small part disposal relief may apply). S22(1)(a) to (d) seem to suggest that there should be some form of diminution in the value or damamge to the land (consistent with a "disposal"), although these particular circumstances are not exhaustive. 

I cannot see it being treated as miscellaneous income as no services are being provided.

Any views would be appeciated. 

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By trust.pem
23rd Sep 2020 10:58

I agree that the fee would fall within S22 TCGA (and would suggest it specifically falls within s22(1)(d)) but cannot see that there is a requirement for a diminution in value.

Under a typical promotion arrangement, the promoter is not acquiring an interest in the land and the 'chose in action' is deemed to be a separate asset for CGT purposes. As a result the part disposal rules and small part disposal rules are not relevant in this scenario.

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Galaxian
By Galaxian
23rd Sep 2020 11:21

Thank you. I see S22(1)(d) is not treated as a part disposal under CG12955 further to the court's comments in Chaloner v Pellipar Investments Ltd.

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Replying to Galaxian:
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By whitevanman
23rd Sep 2020 16:16

You really should read, not only HMRC guidance, but also the Pellipar case before reaching a conclusion. It is also important that, whatever you read, you understand it!
Certainly the quoted case and guidance do not say what you contend for.

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