BIM60345 - Transactions in land: Common situations: Diversion schemes

As discussed in BIM60340, the transactions in land anti-avoidance rules are often applied to diversion schemes.

A diversion scheme works by structuring what is, in essence, a trading transaction in land in such a way that the gain is realised by a person who is not within the charge to UK Income Tax or Corporation Tax.

바카라 사이트˜Haven companies바카라 사이트™

For example, the UK land is purchased by a UK resident with the aim of an eventual sale to a third party. Instead of the UK resident disposing of the land to the third party at some point in the future, the UK resident intermediately sells the property to a (possibly wholly-owned) non-UK resident tax haven company. By structuring the transaction in this way the lion바카라 사이트™s share of the overall profit is diverted to the haven company and kept out of the UK tax net.

Sugarwhite v Budd [1988] 60 TC 679 is an example of such a diversion scheme.

Although it may appear that the rules in S13 Taxation of Chargeable Gains Act 1992 which attribute the gains of non-resident 바카라 사이트˜close바카라 사이트™ companies to UK resident participants would need to be considered (see CG57200), these Income Tax rules take precedence.

바카라 사이트˜G¾±´Ú³Ù¾±²Ô²µ바카라 사이트™

For example, land is 바카라 사이트˜gifted바카라 사이트™ by a UK resident land dealer to a connected UK resident individual. The 바카라 사이트˜gift바카라 사이트™ is an intermediate step between the acquisition of the land by the dealer and its eventual disposal by the recipient at a profit.

The gifting element prevents us from contending that the recipient of the gift is subject to tax on trading income when the gifted land is sold. See William v Davies [1945] 26 TC 371. Instead, the profit remaining in the recipient바카라 사이트™s hands would be assessable only as a capital gain.

In this situation, the entire transaction is, in essence, a trading transaction. The land has passed through the hands of the connected individual merely to reduce the overall charge on trading income.

Transactions in land anti-avoidance rules

In both examples you should consider invoking the transactions in land rules in order to assess the 바카라 사이트˜provider of the opportunity바카라 사이트™ (see BIM60328).