BIM51625 - Builders, property dealers & developers: Property not acquired as trading stock: Own occupation

A house built by a builder, for his or her own occupation, and so used, does not become stock of the trade. The only adjustment for Income Tax purposes in such a case is the disallowance of the cost of construction, under ICTA88/S74 (b). On the other hand, a house built and offered for sale by a builder in the ordinary course of their business is trading stock. The taking of such a house for private occupation should be treated as a sale at market value for Income Tax purposes following Sharkey v Wernher [1955] 36TC275 ( BIM33630).

In practice, many cases fall between these two extremes and should be dealt with by determining the extent to which the house and land can be regarded as trading stock. For example, a private residence built on land held as trading stock would give rise to a Sharkey v Wernher adjustment in respect of the land alone.