On 13 December 2016, HMRC published guidance on the new “transactions in UK land” rules1 . These rules, with effect from 5 July 2016, extend corporation tax and income tax to non-resident companies and individuals who conduct a trade of dealing in, or developing, UK land for the purposes of disposing of it. Essentially, the effect of the new rules is to remove the territorial restriction for transactions in UK land.

The guidance contains some helpful passages regarding the treatment of investment transactions. By way of example:

• rental income from UK properties held by a non-UK company (and not through a UK permanent establishment) as investments will remain subject to income tax, even if the company is otherwise subject to the new corporation tax charge. The same will be true for rental income received from properties held by such a company for the purposes of its trade (see BIM60525)

• the guidance refers the reader to the badges of trade, when discussing whether UK land is held for trade or investment purposes (see BIM60530)

• at BIM60555 the guidance stresses that “the legislation should always be understood in the context that it is taxing only what are, in substance, trading profits”.

A number of examples are given as to whether the “main purpose” of making a profit on disposal test (required under 3 of the 4 alternative conditions that need to be satisfied for the new rules to apply) would be met.

The guidance can be viewed here.