BIM64195 - Private finance initiative (PFI): contribution of land: investment or trading stock
It is a question of fact whether land contributed, as part of a barter arrangement, is acquired as trading stock or as an investment for tax purposes. A PFI 'operator' is not, generally, dealing in land on trading account and, in such circumstances, the land is acquired as an investment for tax purposes. As Lord Wilberforce noted, in the case of CIR v Lionel Simmons Properties Ltd (in liquidation) & Others [1980] 53TC461, at pages 491-492:
" What I think is not possible is for an asset to be both trading stock and permanent investment at the same time, nor to possess an indeterminate status - neither trading stock nor permanent asset. It must be one or the other…"
TB40 (April 1999) stated that land contributed in such circumstances was acquired as trading stock. Where a private sector 'operator' has entered into a PFI agreement, before 31 August 2003, on the assumption that the land contributed would be treated as trading stock, that tax treatment should be accepted.
