BIM60115 | Measuring the profits (particular trades): land: trading transactions: acquisition and disposal of superior interest - example
From HM Revenue & Customs · Business Income Manual
The following example demonstrates the point.
Tenancy acquired 1 January 2010: Cost: Nil.
Freehold acquired, subject to tenancy, 4 December 2011: Cost: £500,000.
Value of tenancy at 4 December 2011: £250,000.
Freehold with vacant possession sold 4 December 2011: £1m.
Capital Gain: There will be a capital gain by virtue of S161 Taxation of Chargeable Gains Act 1992 based on the value of the tenancy at 4 December of £250,000 less the acquisition costs.
Trading Computation
| - | Amount | Amount |
|---|---|---|
| Sale proceeds | - | £1,000,000 |
| less | - | - |
| cost of freehold | £500,000 | - |
| value of tenancy | £250,000 | £ 750,000 |
| Trading Profit | - | £ 250,000 |