Developer payment to farmer not to sell to another

by **aboveusonlysky** on Thu Dec 15, 2011 5:49 pm

If builders pay a lump sum to a farmer for his agreement NOT to sell some fields (on which no planning permission held or even sought) to anyone else for a certain number of years, is the amount received treated as a capital gain?

by **section 44** on Thu Dec 15, 2011 6:00 pm

Yes, sounds like a capital sum derived from an asset.

Assuming that the farmer is VAT registered, is he accounting for VAT on it?

by **mullet** on Thu Dec 15, 2011 7:11 pm

Yes, a Section 22(1)(c) receipt I suspect.

"... there is for the purposes of this Act a disposal of assets by their owner where any capital sum is derived from assets notwithstanding that no asset is acquired by the person paying the capital sum, and this subsection applies in particular to ... (c) capital sums received in return for forfeiture or surrender of rights, or for refraining from exercising rights"

The owner of an asset has the right to sell that asset to whoever; this sounds like a payment to secure the availability of the asset but not some form of deposit or option.