Investment gain or Revenue??

I have a new client who is effectively a property developer and will be reporting under FRS 102.

 

As a very high level overview the business works as follows:

  • The client identifies a property to buy and develop into a care home
  • agrees a long term lease with a housing association
  • sells the property and the lease as a package to an investment fund.

The agreement with all parties (client, property seller, housing association and investment fund) will be signed on the same day. The client then has a commitment to develop the property to the required standard (but does not own the property).

 

The structure of the deal is as follows. The property is purchased into an SPV (effectively a £1 company set up by the client as a subsidiary) and the investment fund will purchase the shares (for say £1m) in the SPV and thus owns the property. (The SPV method is currently being used as a means to reduce stamp duty)

 

The question: In my opinion, the client has a gain on investment here of £999,999 as a result of the share sale. However, the client (also an accountant) is adamant that this could be viewed as revenue, on the basis that he will be completing several of these transactions each period and that the shares are merely set up as a vehicle for the property. He has also pointed me in the direction of a large company with exactly the same model, audited by a large audit firm, who treat similar transactions as revenue.

 

I'm struggling to see how this can be argued. Has anyone got any thoughts here, or similar experiences?