Barn conversion that has gone very wrong

Camileo

Hello all, I am looking for some advice on a problem



My parents - both elderly, began converting a barn on their farm in 2014 they got half way through and then ran out of money so can not complete it. They were hoping to gift / sell it to my brother so that he could get a mortgage to finish it. They were unaware of capital gains and can not afford to pay it and therefore can not proceed in this direction.


The barn needs approximately £20,000 - £30,000 to complete and the capital gains would be approx £30,000.


I was wondering if there is an alternative way of financing the completion of the barn? can my brother come in as an investor so there is no gifting / selling? if this is possible how do you go about this - would you have to turn the barn / estate into a company?



Any suggestions / advice would be very welcome - right now my folks are in despair having spent their life savings on this project which currently looks like it will never be finished.

Doozergirl

Equity release?

Commercial development loan?

If they have plenty of equity in it then there will be a solution available.

Camileo

Thank you for your reply


With equity release the terms are exploitative, there covered it on radio 4 a few weeks ago some woman borrowed £25000 with equity release and ended up having to pay over £75000 for it.


They are too old (one is 90 and the other 85) to get a commercial development loan themselves and loan terms for them as pensioners are equally exploitative.



My brother needs to get the loan but he needs to be in a position where he has some ownership - otherwise he is investing without security and it is how to establish this that is the problem.

silvercar

Does the value of the half converted barn show a capital gain of £30k, or is that only the projected gain when it is complete?

Even if this is the case the actual tax on a gain of £30k would be small if the parents haven't used their £11k CGT allowance on anything else. £15k each, less an allowance of £11k means £4k charged at a rate of 18% or 28% depending on their personal tax position.

HappyHarry

If they sell it now, then the CGT will be payable by 31 January 2020.

Can your brother complete the necessary works and sell it on within that timeline?

AnotherJoe

Something missing here.
Cant your brother just buy it from them ? They can then pay the small, if any, CGT out of the proceeds.
(As above, if the CGT is £30k the amount needing to be paid is low and that calculation doesn't include costs of selling which will reduce it further)

Camileo

Thank you for reply's, the something missing is that due to clause 3 in the planning consent the barn can not be sold / let out separately from the house.

davidmcn

Camileo wrote: »

due to clause 3 in the planning consent the barn can not be sold / let out separately from the house.

Ok, would have been useful to mention that at the outset as a more fundamental reason why they can't sell it to him! What's the proposed use for it? What happens on the remainder of the farm?

GrumpyDil

That was kind of important. What is the full wording of the clause. If the barn cannot be sold or let separately to the house what was the plan originally?

Doozergirl

And how can there be a capital gain if it's part of the main residence.

davidmcn

Doozergirl wrote: »

And how can there be a capital gain if it's part of the main residence.

It's (probably) only the farmhouse which would qualify for relief as the principal residence, the remainder of the farm is business property.