Capital Gains Tax on Building Plot

YellowA4

Some help please.......

I sold my house in November last year and moved into a rented property while I found somewhere to live. On a whim I bought a plot of land from a property auction and have spent the last 6 months gaining new planning permission to build a cottage.

Now I have the planning I am unable to find a self build mortgage and don't have enough money to complete the build, so I have decided to sell the plot.

Now I have the planning permission the land is worth approx £92000 more than I paid for it. If I was to sell the plot and put the money towards buying myself another property to live in would I be liable to pay and capital gains tax? And if so how much?

Purchase Price - £108,000
Fees and Charges - £7,500
Work Costs so Far - £3,800
Expected Sales Price - £200,000

Any help would be greatfully recieved.

Gul

DVardysShadow

Crosspost

https://forums.moneysavingexpert.com/discussion/4036109

Please don't cross post - or if you really must, please say that you have.

roger196

Could be trading income ( or adventure in the nature of trade) in place of capital gains tax.
Have you done any form of property development before?
Have you done any form of land purchase and sale before?
How did you go about getting planning permission?
Have you any special skills which helped you get pp
What is your normal occupation?
How did ypu finance the purchase of the plot,
what was the rate of interest,
when did the loan need to be repaid?

YellowA4

roger196 wrote: »

Could be trading income ( or adventure in the nature of trade) in place of capital gains tax.
Have you done any form of property development before?
Have you done any form of land purchase and sale before?
How did you go about getting planning permission?
Have you any special skills which helped you get pp
What is your normal occupation?
How did ypu finance the purchase of the plot,
what was the rate of interest,
when did the loan need to be repaid?

My previous home was a barn conversion that I converted in 1991 and lived in until November. I have not bought/sold/built/owned any other property in that time.

I gained planning permission by applying to the council through an architect who draw up the plans. All I did was pay the bill!

I have been self employed in the motor trade for the last 25 years.

I financed the purchase through the sale of my previous home, there is no mortgage/loan and therefore no rate of interest.

Pennywise

It will either be capital gains tax or income tax and NIC on the profit you've made.

It will depend on your intention at the time of purchase. If you intended to build a house to live in as your home, and can prove it, then it's capital gains tax.

If your intention was to build a house and sell it for profit, or you can't prove it was intended for your home, then you've been "trading" and the profits will be liable for income tax and NIC.

Either way, the profits are taxable. You can't claim private residence relief because it was never your private residence - you have to actually live in a home as your private residence to claim relief as such.

Let's hope that your planning application clearly showed it as a home for yourself, and can be backed up by evidence from your architect, and your mortgage applications, all of which provide evidence that your intention was a home for yourself, hence taxable under the more generous CGT regime, i.e. lower rates of tax and annual CGT exemption.

roger196

Did you ever have the funds (or be able to demonstrate a realistic ability to obtain a sufficient mortgage) to build yourself this property ie as described by the architect.
If you want to look at HMRC guideance on the subject try
http://www.hmrc.gov.uk/manuals/bimmanual/BIM60000.htm

Happy reading.

sunshinetours

Going into rented after the sale of your previous main residence is a big indicator that you were doing this for yourself so I can't see it would likely be anything other than CGT at 18/28%. Don't forget you may have your annual CGT allowance of just over £10k to use up as well if no other capital gains in the saem tax year (if married and done in joint names then two lots)