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 ITTOIA/S34(1)(a). On the other hand, a house built and offered for sale by a builder in the ordinary course of their business is trading stock. From ITTOIA/S172B the taking of such a house for private occupation should be treated as a sale at market value for Income Tax purposes. This follows the case of 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.