RPDT10330 - Key concepts: interest in land: interest in land as 'trading stock' - section 36 finance Act 2022

Holding an interest in land under development which will be disposed of in the ordinary course of a developer’s trade is a key distinguishing feature of a property developer as opposed to a contractor engaged in similar development activities.

Disposals for these purposes will include part disposals of an interest in land, such as the grant of a long leasehold interest by the freeholder. A developer that owns the freehold interest in land and retains the freehold whilst granting a long lease in respect of properties developed on the land nonetheless makes a disposal of an interest in land in the ordinary course of the trade. There will be occasions when a disposal of the interest in land that may have initially been contemplated in the course of a developer’s trade does not actually arise. An example of this would be where the developer decides to retain all or part of a development for investment purposes, and trading stock is appropriated to fixed assets. For RPDT purposes, this appropriation is a disposal under the usual CT trading rules, and the definition of trading stock at FA22/S36(6)(b) ensures that no actual disposal is necessary and, up to the point of appropriation, the interest in land is treated as held as trading stock.

Profits or losses arising to the freeholder for services rendered to leaseholders individually or collectively after the development phase will generally fall out of scope of the RPDT. Examples of such profits or losses that would be excluded are ‘event fees’ and other service charges earned by a retirement property developer that continues to manage the properties they have developed, but similar principles can apply in other situations where the developer or a member of its group retains an interest in land after the disposal of leasehold interests.

RPDT01100 contains a general introduction to RPDT and a list of abbreviations used.