Income Tax Act 2007 section 517H

Fragmented activities

Section 517H prevents the fragmentation of land development and disposal activities between associated persons to avoid income tax on profits from UK land transactions.

• Where a person (P) disposes of UK land meeting the conditions in section 517B, and an associated person (R) has made a relevant contribution to developing the land or realising a profit from its disposal, P's profit is calculated as though P and R were the same person.
• A contribution is "relevant" unless the profit P makes from it is insignificant relative to the overall size of the project, and it can include professional services, financial support, or the assumption of risk.
• R is "associated" with P if they are connected persons under sections 993 and 994, or if they are related parties under section 517U; the association must exist at some point from when the project activities begin until six months after the disposal.
• Any payment made by R to P to meet or reimburse the income tax P owes as a result of this rule is tax-neutral — it is ignored for income tax and corporation tax purposes and is not treated as a distribution for corporation tax purposes.