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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4200
Experience:  FCCA FCMA CGMA ACIS
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I have a client who has purchased properties to develop via

Customer Question

I have a client who has purchased properties to develop via a limited company, the development work did not go ahead immediately so they let the properties, they have recently finished the new builds and sold them, I am fairly certain this is trading income however, I am unsure if the initial cost of the land/properties can be offset and if so where would this be recorded in the accounts, I have shown the sales proceeds in sales income
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. I am of the opinion that this is not trading income, but a capital gain. It does not matter, however, as the Capital Gains Tax (CGT) regime does not apply to companies, all gains or losses being included in the company's trading account. Thus your posting of the sums received on selling the properties is correct. The purchase costs and any improvements, maintenance and completion costs would similarly pass through the trading account also, but, of course, on the other side of the ledger. I do hope that I have been able to help you solve your little conundrum.
Customer: replied 1 year ago.
Can I just clarify one point I will be crediting land and buildings disposals (balance sheet) and debiting sales income = correct or would I be better posting to Exceptional - p/l on disposal
Expert:  bigduckontax replied 1 year ago.
It must be posted as an exceptional profit/loss on disposal. Of course the position will be reflected into the balance sheet also.
Customer: replied 1 year ago.
Ok I understand now the sales proceeds and cost of acquisition etc all exceptional profit/loss on disposal in the same way you would treat the disposal of any other asset.
Expert:  bigduckontax replied 1 year ago.
Indeed, though for this treatment I would caution 'major asset.'
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.