Selling land attached to house and CGT

Gypsysmum

Hi
We have owned our house and nearly four acres of land (about 1.5 hectares) for over 30 years. We are near the settlement boundary for our village and there are rumours that we may get planning permission on part of our land. The part in question is about .4 of a hectare.


My understanding is that the .4 of a hectare would be exempt from CGT as it comes under the half hectare limit. Does, however, the fact that the .4 is part of a larger piece of land make any difference? The land is divided by fencing into two plots. The .4 hectare has road frontage but it does have a gate into the rest of the land. We can access both fields from our house and they could be separated quite easily. If we separated them completely i.e. took out the gate that is between them, would that make a difference?


The house is a cottage at the edge of a village and the land could be considered to be integral to it. We have not used the land for any purpose other than keeping our horses on it when we had them.


I also understand that we must sell the land before the house to qualify for CGT exemption. Would it be beneficial to sell the larger field off first to reduce our land holding to just .4 of an acre in total?


Thanking you in advance


GM

antrobus

Gypsysmum wrote: »

Hi
We have owned our house and nearly four acres of land (about 1.5 hectares) for over 30 years. We are near the settlement boundary for our village and there are rumours that we may get planning permission on part of our land. The part in question is about .4 of a hectare.


My understanding is that the .4 of a hectare would be exempt from CGT as it comes under the half hectare limit. Does, however, the fact that the .4 is part of a larger piece of land make any difference?

Yes. You want to read this:-

Helpsheet 283 Private Residence Relief
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323679/hs283.pdf

This is what it says;

If your garden and grounds do not exceed half a hectare (which is a little over 1 acre), you are entitled to relief for all of it.....If your garden and grounds exceed half a hectare, you may not be entitled to relief for all of it. The area for which you are entitled to relief is called the permitted area. It consists of the area that is required for the reasonable enjoyment of your dwelling house as a home. The size and character of your dwelling house must be taken into account.

The 'half hectare limit' applies to what you've got, not what you're selling. You've got 1.5 hectares, so the presumption would be that the sale of that 1.5 hectares in whole or part would not be covered by Private Residence Relief i.e. it's taxable. It would be up to you to argue that the land in question was "required for the reasonable enjoyment of your dwelling house".

Gypsysmum

Thank you Antrobus


If we were to sell off some land to reduce our holding to half a hectare, would that then reduce our liability? Is it legal to do that?


I understand that there is some calculation that gives us relief based on the number of years we have lived here. If we sold the land for building at, say, £100,000 what would be the tax liability after 33 years?
If the developer was able to build more than one home on the land would we be able to sell off each plot separately, perhaps one per year, to reduce our liability?

booksurr

your land holding comprises >0.5 hectare. Therefore any sale of any land, such as piecemeal packets of it, would be a disposal for CGT purposes and therefore trigger a CGT liability on the packet being sold.

LittleMissGiggles123

The way I read it (and correct me if i'm wrong) is that it doesn't matter if you sell it in little chunks, the CGT would still be payable because its how much you owned in the beginning that triggers the liability.


So if you owned 10 hectares but sold 1 hectare you would pay the CGT on the amount you receive for that sale. Then if you sold another 0.5 hectares you would pay CGT based on the amount you receive for that sale etc.


I'm sure somebody more knowledgeable will correct that if it's wrong, but that's how I assumed it when I read about it.

Gypsysmum

I have seen it mentioned that developments of half a hectare are exempt from CGT. Perhaps it is possible to only claim that exemption once? So that if we went on to develop more of the land we would not be able to claim the half hectare exemption again.
There is also mention of the use to which the land has been put. If the land has been used for the personal enjoyment of the owner then that, apparently, helps.
I am coming to the conclusion that if the land has been used for personal pleasure, and under half a hectare is developed then it will be exempt.
The other thing I have seen is that, where CGT is payable, there is relief for every year the land has been in the ownership of the person concerned. For instance - we have owned it for 33 years so we would be entitled to claim the allowance for each year of ownership at the rate applicable for the year.
Am I right?

booksurr

Gypsysmum wrote: »

I have seen it mentioned that developments of half a hectare are exempt from CGT. Perhaps it is possible to only claim that exemption once? So that if we went on to develop more of the land we would not be able to claim the half hectare exemption again.
There is also mention of the use to which the land has been put. If the land has been used for the personal enjoyment of the owner then that, apparently, helps.
I am coming to the conclusion that if the land has been used for personal pleasure, and under half a hectare is developed then it will be exempt.
The other thing I have seen is that, where CGT is payable, there is relief for every year the land has been in the ownership of the person concerned. For instance - we have owned it for 33 years so we would be entitled to claim the allowance for each year of ownership at the rate applicable for the year.
Am I right?

please provide a link to where you have read this

I think it highly likely you are grasping at half understood straws

Motormad

We were in a very similar situation to the OP although located in Scotland.We sold a Plot about 5 years ago but had to pay CGT but thankfully had the foresight to put our property in joint names beforehand to give double the allowance.The plot we sold was about 1/3 of an acre out of a total area of 3 acres.English laws on this maybe different of course!

Motormad

I think the best option to save CGT would be to build a house for yourself then sell your original house which would be exempt.