CGT on building site gifted by Father

Victor58

Hi There,

My father is giving me a building site which I have already been granted planning permission on, Will there be any issue with Capital gains tax or since it is a gift will it be exempt?

Thanks

CLAPTON

the gift from your father counts as a disposal for CGT purpose.

So he will be liable to pay CGT on the difference between his price and the commercial value now (less expenses and his CGT allowance etc.).

Victor58

Thanks CLAPTON, does he only have a CFT allowance for the current year of for each year he has owned the Asset?

CLAPTON

CGT allowance (9,200 currently) only applies in the year of the disposal i'm afraid.

depending upon when the land was acquired he may be able to benefit from indexation relief (before 1998 ) and can also benefit from taper relief that may reduce the tax a bit.

Victor58

The land was purchased over 30 years ago, I estimate the difference in pruchase price and current market value would be around 200K if PP is taken into consideration, since the planning permission is in my name can my father have it valued simply as agricultural land, this would bring the difference to maybe £50K, any idea what the tax bill is likely to be? on either figure

CLAPTON

you need to know the purchase price ..lets say £2000
and lets say the value today is 100,000


firstly there's indexation relief which inflates the cost by about 100% so we adjusted cost of 4000 approx

secondly there is taper relief which works on the profit
which is now 100,000 - 4,000 so being 96,000

taper relief reduces the profit to 70% i.e. 67,200

thirdly he has a CGT allowance of 9,200 so making the profit 58,000

he then pays tax on as if this is additional income so if he is a higher rate payer the tax is £23,200

i've made all sorts of assumptions.. its personal and not business and there are no 'costs' to deduct, and he has not otherwise used his CGT allowance this year but you should see the general principle.

he could give half the land to his wife and then she could use her CGT allowance further reducing the 'gain' by another 9,200

With this sort of money you really need to get professional advice.

As far as the fact of the planning permit being in your name, i've no real knowledge about that but i can't see that that will make any difference... its the value of the land at disposal that matters and clearly the planning permission increases the value no matter who's name it is in.

Victor58

Thanks a lot for all your help CLAPTON