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Tribunal Considers What Is A Property Development Trade

Can ATED be claimed on a one-off improvement?

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Posted by Helen Beaumont on 13/11/2019 @ 8:00AM

Across the country, Brexit uncertainty has hit property development hard. Homes have failed to sell and agents are recommending drastic measures to improve their appeal ...

Is a one-off improvement classed as property development trade?

Is a one-off improvement classed as property development trade?

copyright: visivasnc / 123rf

This happened to a company called Hopscotch Limited though it was on a far grander scale than you'd expect. They had a makeover cost of £1m for a residential property that had been valued at £13.5m before any improvements.

"Hopscotch did own the property so it was subject to the Annual Charge for Enveloped Dwellings (ATED)!"

They paid it for 2013/14 to 2015/16, but claimed relief for 2016/17 and 2017/18 while the improvements were taking place. The company believed it was carrying on a property development trade, but HMRC disagreed. The tribunal looked at what would be considered a property development trade as it would have implications for other property owners.

Hopscotch's argument was that even though the redevelopment was a one-off, it was still a property development trade, which the tribunal accepted.

However, HMRC argued that the company had not prepared a business plan or even a financial forecast for the supposed property development trade in respect of it being done in the UK and the company was registered in the British Virgin Islands. The tribunal concluded that this was not a typical property development trade, they simply maximised the value of the investment and ATED relief was not due.

"Hopscotch has appealed to the Upper Tribunal and will be heard in the new year!"

If you're a property owner, you'll be relieved to know that a makeover (even one that costs £1m!) will not make you subject to income or corporation tax on the proceeds from the eventual sale of the property.

However, as a word of warning, if you are subject to Annual Charge for Enveloped Dwellings in respect of your properties, you need to be very cautious about which reliefs you claim.

Until next time ...



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About Helen Beaumont ...


Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.