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The income tax and capital gains tax charges that may arise on slice of the action schemes and overage.
Many UK taxpayers are taking advantage of the national housing shortage by selling land for construction and benefiting from the capital gains tax rates that can apply to property developments. One area of attack by HMRC is any arrangements involving the landowner that can be deemed to be “slice of the action” schemes. In general this is where the vendor receives an agreed percentage of the future development profits. The initial consideration is for the disposal of a capital asset – the land – and will generally be subject to capital gains tax. However the subsequent consideration is for the later disposal of a new asset – the right to the contingent consideration – the “slice of the action”. Such a disposal could be caught under ITA 2007 s 752 and s 756 (“Income treated as arising when gains obtained from some land disposals”) because the vendor’s rights...
