Capital gains tax - does taper relief still exist?

GAILEY

Hi,
Hope someone might be able to point me in the right direction.
My parents, both retired for several years, have recently sold some land attached to their home. They have held this for over 25 years.
They are confused about their declaration to hmrc - I know there is an annual allowance of £10,000 odd - given that they each owned half can they use that each?
I read about taper relief - is this a thing of the past or could this help them too?
Thanks in advance:)
Gail

00ec25

taper relief not applicable to personal assets (still exists for businesses but not individuals)

the personal allowance is just that, available to each person who owned the asset being sold, so as you say both parents jointly owned the land then each can claim £10,900 against their 505 share of the gain when doing their individual tax return

zygurat789

GAILEY wrote: »

Hi,
Hope someone might be able to point me in the right direction.
My parents, both retired for several years, have recently sold some land attached to their home. They have held this for over 25 years.
They are confused about their declaration to hmrc - I know there is an annual allowance of £10,000 odd - given that they each owned half can they use that each?
I read about taper relief - is this a thing of the past or could this help them too?
Thanks in advance:)
Gail

There are provisions for the sale of land which is part of the principle private residence. The provisions invove reasonableness and the % sold.
It is possible that there will be no CGT.

GAILEY

Thanks for your replies - I think I am moving forward, albeit slowly, in my understanding of tax.
The situation is basically that my parents have a small farm - they retired from hands on farming about 5 years ago but have kept the land around them and let most out for grazing until selling a couple of fields recently.
It seems, if I get it right, that they will be liable to CGT on the gain in the value of the land, less the cost of the sale but will get an allowance of £10,900 against each of their 50% gains.
I have been looking into entrepreneur relief, but they don't seem to qualify for that as they still have remaining field let out so the business as such is continuing albeit in a very downscaled way - but presumably they will be able to set off their tax on the chargeable gain against their individual returns for next year - as they are non taxpayers (both being in their 70's).
Does this sound right.
Do you think I m missing anything obvious?
Thanks again:A

00ec25

given the more detailed snippets you have now revealed you should not try to DIY the tax
possible issues:

- you are now talking about land which may have had an agricultural use restriction on it 25 years ago which has now been sold with planning consent : big implications for valuation

- you cannot teach yourself entrepreneurs relief online

- taper relief may well apply if the asset sold belonged to the business, you did not say it was farmland and they are/were farmers in the OP !!!!

- CGT and income tax are separate, there is no offset against "next year's return ".

- the rate of CGT used in the calculation will be based on the total income + gain the year of sale , they may be non tax payers for income tax but that is does not affect the calculation of the rate and amount of CGT payable other than it means more of the gain falls in the 18% band than would for an income tax payer

I appreciate its probably the last time they will get a sizeable amount of money at their ages but that makes it even more important that they use a professional accountant, and moreover one experienced in farming

GAILEY

Thanks.
The land was not a business asset and has no planning consent - they are just fields and they were very small scale farmers. The amount isn't huge (just over £50K)
I will try to look at all their available options before letting them know whether I feel they need to take professional advice.
I will try to teach myself as much as I can online on the way..... knowledge cannot hurt me as long as I realise I only have a little of it:rotfl:

jimmo

Taper Relief ceased in 2008. It only applied to individuals, trustees and personal representatives and did not apply to companies.
Companies, however, continue to be entitled to indexation relief.

http://www.hmrc.gov.uk/manuals/cgmanual/CG17895.htm

Entrepreneurs relief has its own definition of “business”. That is a trade, profession or vocation. That can include furnished holiday lettings, hotels, guesthouses etc but it excludes any other lettings

http://www.hmrc.gov.uk/manuals/cgmanual/CG63965.htm

However there is a possible exception and that is farming.

Long term lets for more than 365 days count as normal letting and not trading.

http://www.hmrc.gov.uk/manuals/bimmanual/BIM55060.htm

Short term grazing lets can however count as trading.

http://www.hmrc.gov.uk/manuals/bimmanual/bim55065.htm

If the farmers retired 5 years ago and the letting has been long term they will fall foul of the 3 year time limit for Entrepreneurs Relief.

See the 4th bullet point here.

http://www.hmrc.gov.uk/manuals/cgmanual/CG64045.htm

If the letting has been short term grazing then they will have continued trading until the land was sold and will qualify for Entrepreneurs Relief.

zygurat789

GAILEY wrote: »

Thanks.
The land was not a business asset and has no planning consent - they are just fields and they were very small scale farmers. The amount isn't huge (just over £50K)
I will try to look at all their available options before letting them know whether I feel they need to take professional advice.
I will try to teach myself as much as I can online on the way..... knowledge cannot hurt me as long as I realise I only have a little of it:rotfl:

If your parents have declared income as farmers on this land then it may well be a business asset.
Remember the old saying about a little knowledge? I'm afraid tax is an awfully big subject and you have shown above that it is not only understanding the tax calculations but also the provisions.
I suppose the maximum CGT would be £7896 or, more likely £5076. It may well be that an accountant could reduce this by more than his fee but you haven't given us enough relevant information to comment.

GAILEY

Thanks )