Relief for work in the course of a property development trade

In 1993 the taxpayer bought a residential property. It was occupied from time to time by people permitted to do so by its directors but from 2008 use of the building declined. The company therefore decided to sell it. In the absence of a buyer and after the advice of its estate agent the company developed it in the hope of making the property attractive and to achieve a higher return.

In its annual tax on enveloped dwellings returns for the 2017 and 2018 periods the company claimed relief on the basis that the renovation work amounted to the start of a property development trade (FA 2013 s 138). HMRC refused the relief saying the taxpayer had not bought the property for development purposes.

The First-tier Tribunal said no mention was made of the expected cost of the redevelopment or the profit likely to result in the...