Building on Land Owned by Parents...

MrJB

If the father inherited the land 50+ years ago, then I cannot envisage there will be any liability for CGT. The land will have limited value - was the current use consented? If so were there any restrictions. The best time to gift the land would be when it is worth the least - if that's pre obtaining PP then so be it.

As an aside, what was the land used for? Have you considered contamination? Is the building constructed of any hazardous materials ie asbestos.

You really need to take advice from a surveyor imo.

Lost_Property

If the father inherited the land 50+ years ago, then I cannot envisage there will be any liability for CGT.
This needs explanation, surely?

Also, when disposing of land/property that isn't your main residence, presumably you'd get your CGT allowance of about £10k before any tax was due, wouldn't you? Would it be possible to double this up by gifting as two packets of land straddling consecutive tax years? You'd benefit from two lots of the £3k IHT allowance as well.

A rough estimate of the value would help this discussion. Also, what is the time after which gifts cease to count as deprivation of assets? Is it also on a sliding scale, like IHT, or simply some arbitrary cut-off period.

getmore4less

G_M wrote: »

If the land is gifted, and has a value greater than £3000, then if he died within 7 years it would be included in his Estate for Inheritance Tax purposes (though on a sliding scale as the 7 years progress).

.

ONLY if it is worth over the nil rate band(with other gifts) currently that would be at least £325k

getmore4less

Gifting very rare for gifts to increased IHT liabilities for the doner.

getmore4less

Deprivation of assets.

Assuming they are in relatively good health I think you will be safe ther is a clearly documentable reason that this is not deprivation.

The primary purpose of the disposal/gift it to provide land for you to build a property to meet your needs as your cuurent premisis are not suitable.

Planning and raising the capital to build will be the key to success.

It may be that if there is more land and the local councils have targets then it may be possible to create a mini development where another property is sold off to covers the costs.

booksurr

getmore4less wrote: »

ONLY if it is worth over the nil rate band(with other gifts) currently that would be at least £325k

you keep posting this but always out of context since your comment relates only to point 1 not 2

there are 2 aspects to PETS
http://www.which.co.uk/money/tax/guides/inheritance-tax-explained/inheritance-tax-planning-and-tax-free-gifts/
1. will the recipient have to pay any tax?
If the seven-year running total of taxable gifts and PETs made comes to less than the tax-free allowance (at the date of death), no tax will be due on the PET. If tax does become due on a PET, the person who received the PET will be asked to pay the tax (allowing for the 7 year rule - ie taper relief)

2. how does it affect the estate on death?
The second thing to happen if you die within seven years of making a PET is that the PET is also added to your estate to work out how much tax is due on the estate. If the seven-year running total of PETs, chargeable gifts and your estate comes to less than the unused tax-free allowance, no tax will be due.

However, if much of the tax-free allowance has been used up against PETs and taxable lifetime gifts, this can leave little or no allowance to be used against the rest of the estate.

booksurr

MrJB wrote: »

If the father inherited the land 50+ years ago, then I cannot envisage there will be any liability for CGT.

wrong. The land is separate from the home therefore is not covered by exemption, of course it is liable

it would have been better if you had said there may not be much CGT to pay as the gain will be the difference between its value at 31 March 1982 (the date CGT rules changed for this purpose) and its value at the date of gift

what the basis of the valuation will be is therefore the key test:
- always been agricultural land - expect relative low value per acre
- industrial/commercial land - expect higher value (adjusted for the building being derelict of course)

Chorlie

Thanks for the replys...


The site is away from my parents home.

He was a joiner before he retired, the workshop is still weather tight and contains several woodworking machines. After he retired he did rent it out, but looks liked the guy who rented it doesn't want to renew for this year.

The roof is part asbestos and we know that will have to be dealt with when the time comes.

He health isn't great it was the reason he retired, but he's got all his marbles.

As for value that's the hard bit, when he retired he had it valued for rental & sales as a business premises (including yard / land the building in on) and it was valued at around £125k, but was told it'll be more if there were planning permission for housing.

When he retired a few developers asked if he'd sell; no money offers were made since he's never wanted to sell, but one was talking about two buildings the other mention 4.

Planning has got a little tighter in this area in the last 12/18 months so I don't see 4 being passed, 2 maybe (but you never know with the planners).

I think I can raise enough funds to build my place (I only need a 2 bedroom bungalow, big enough to move around in my chair), but I couldn't afford to buy the land (if it was worth around £125k or even half that if split in two plots) since my budget is tight and I need enough left over to be able to live in it.

MrJB

booksurr wrote: »

wrong. The land is separate from the home therefore is not covered by exemption, of course it is liable

it would have been better if you had said there may not be much CGT to pay as the gain will be the difference between its value at 31 March 1982 (the date CGT rules changed for this purpose) and its value at the date of gift

what the basis of the valuation will be is therefore the key test:
- always been agricultural land - expect relative low value per acre
- industrial/commercial land - expect higher value (adjusted for the building being derelict of course)

You're indeed correct, and my wording was particularly sloppy, please do accept my apologies.

Without more salient information it is difficult to say, but based on similar valuations I've done elsewhere I'd be surprised if there's any significant (if any) payment due. It really depends upon the local market but if I were the OP, I'd be taking advice from a local surveyor.

getmore4less

booksurr wrote: »

you keep posting this but always out of context since your comment relates only to point 1 not 2

there are 2 aspects to PETS
http://www.which.co.uk/money/tax/guides/inheritance-tax-explained/inheritance-tax-planning-and-tax-free-gifts/
1. will the recipient have to pay any tax?
If the seven-year running total of taxable gifts and PETs made comes to less than the tax-free allowance (at the date of death), no tax will be due on the PET. If tax does become due on a PET, the person who received the PET will be asked to pay the tax (allowing for the 7 year rule - ie taper relief)

2. how does it affect the estate on death?
The second thing to happen if you die within seven years of making a PET is that the PET is also added to your estate to work out how much tax is due on the estate. If the seven-year running total of PETs, chargeable gifts and your estate comes to less than the unused tax-free allowance, no tax will be due.

However, if much of the tax-free allowance has been used up against PETs and taxable lifetime gifts, this can leave little or no allowance to be used against the rest of the estate.

That's the point and the context needed for Taper relief.

Taper relief only kicks in over the nil rate band

Point 2 is irrelevent for taper relief.

The effect for point 2 is that PETS use up the nil rate band first.