Land rich entities
An entity is regarded as deriving its value from land if at least 75% of the value of the entity derives directly or indirectly from UK land.
A person has a ‘substantial interest’ in an entity if (broadly) the person owns or owned at least 25% of the company at any time in the two years before the disposal.
The property test looks at the gross value of the company’s assets, ignoring any liabilities. Where a group of companies or entities is disposed of, the 75% property test is looked at on a group basis. There are rules that allow tracing through subsidiary companies to determine how much of any company’s value derives from UK property.
For the 25% holding test, ‘entity’ means a company, partnership or trust. In deciding how much of an entity a person holds, their interest is aggregated with interests held by connected persons.