Readers’ forum: Tax implications of timing of payment of profit share

My client owns land in the UK and he has been approached by a developer who believes that planning can be obtained. 

A number of options have been proposed. One is for my client to receive no up-front payment but instead share in any development profit.

The tax base cost of the land is £1m. The ‘first initial date’ value (BIM60650) is believed to be £4m and the ultimate total receipt could be £21m. I appreciate that the proceeds will be split between capital gain (£4m less £1m) and the balance of £17m will be subject to income tax under the transactions in land provisions of ITA 2007 s 517A-U.

Any contract will be subject to planning and payments to the trust will be phased over four to five years as the development progresses. At what stage will the payment be disclosable and taxable?

A second option...