Receiving land

landbeneficiary

It is looking as though we may be fortunate to receive land from a parent, with the hope of building a property for us to reside in. The land is part of their garden and currently houses their garage.

As part of this we want to mitigate any exposure to tax and were wondering if there were any advice on the best way to go about this. As i understand there would be CGT implications involved, if we were either gifted or purchased the land?

Also is it correct the if gifted and the parent passes away within 7 years there may be IHT implications?

We could pay for the land if that made things more efficient but have no idea the best way to approach the situation. Going to see the accountant and solicitor next week but want to be a little clued up first

SeniorSam

Gifts such as this will not leave your parents estate until they die, as your parents will continue to have use of the land.

If the land has been separated completely so that no access to it can be retained by your parents and the Deeds changed and created for the plot of lane, then the gift would remain part of your parents estate for a seven year period.

I suggest that you take advice from a S.T.E.P solicitor.

Sam

CLAPTON

landbeneficiary wrote: »

It is looking as though we may be fortunate to receive land from a parent, with the hope of building a property for us to reside in. The land is part of their garden and currently houses their garage.

As part of this we want to mitigate any exposure to tax and were wondering if there were any advice on the best way to go about this. As i understand there would be CGT implications involved, if we were either gifted or purchased the land?

Also is it correct the if gifted and the parent passes away within 7 years there may be IHT implications?

We could pay for the land if that made things more efficient but have no idea the best way to approach the situation. Going to see the accountant and solicitor next week but want to be a little clued up first

a little unclear


is the land to be split in two making two separate dwellings with separate deeds etc ?


what size is the total area of the land?

landbeneficiary

The land would be signed over to us, so the deeds would be in our name before we progressed with the build / planning permission etc and as such considered as two seperate dwellings with their own boundaries and access

Is it big enough to build a modest house, with garden and parking for a couple of cars.

CLAPTON

landbeneficiary wrote: »

The land would be signed over to us, so the deeds would be in our name before we progressed with the build / planning permission etc and as such considered as two seperate dwellings with their own boundaries and access

Is it big enough to build a modest house, with garden and parking for a couple of cars.

In general if your parent live in the property as their primary residence and then transfer/sell part of their garden then they do not pay any cgt.
However if it is in excess of 5000 square meters there are other provisions.

Assuming that it is not over 5000 square meters then neither they nor you are liable to cgt.

If it is a gift then there is no stamp duty.

Assuming you then build and live there it becomes your primary residence and you will have no cgt if you then sell in the future


There is a potential Inheritance tax issue if your parents die with 7 years as the value of the land will be 'added' to their estate for IHT purpose: however that would happen if they didn't give it to you and it just stayed part of their estate.

SeniorSam

The inheritance tax issue would only be applicable if the value of the estate of the last to die was in excess of the nil rate band of £325k at present, or twice that if the first to die has left their estate to the survivor.

If the final estate value is below the nil rate band (including any gifts within the 7 year limit) then there are no IHT matters to be concerned with.

Sam

kidmugsy

If IHT is a real worry, your parents could take out seven-year term life insurance, the payout (if it occurs) being directed to you. That way you'll have money to pay the IHT.

Unless your parents are old or in ill health they might find the insurance pretty cheap for the amount of peace of mind it brings to you all.

Savvy_Sue

SeniorSam wrote: »

The inheritance tax issue would only be applicable if the value of the estate of the last to die was in excess of the nil rate band of £325k at present, or twice that if the first to die has left their estate to the survivor.

If the final estate value is below the nil rate band (including any gifts within the 7 year limit) then there are no IHT matters to be concerned with.

Your 'ifs' are quite correct, but I can't help thinking that IHT liability is more likely than not if parents own a house within a garden large enough to give away a chunk on which a separate house, garden and parking for several cars can be accommodated ...

System

I understand that for IHT and CGT purposes the "hope" value of land that has a potentially enhanced value dependent on planning permission has to be considered.

landbeneficiary

Thanks all for the advice