part of garden to be sold as building plot

yellowbelle

My question is somewhat complex. My parents in law owned a house with a large garden for over 40 years. On my Father-in-laws death everything was automatically passed to my Mother in law. However - she was advised to make a deed of variation which divided everything- half to her, and the other half to be shared equally between my husband and his two siblings. My mother in law is now 88 and has become infirm. 18 months ago we moved her into a care home. For the past 18 months (my brother in law was the main instigator in this) we have been trying to obtain planning permission for a building plot in the garden which we have just obtained. My question is this - we understand that we will be liable for Capital Gains Tax but how do we work out how much. I have looked on the government websites but nothing relates to this. How can we work out how much profit will be made - if it was never bought in the first place but was part of the main dwelling (which we now have for sale separately.? Getting very confused.

AdrianC

Use the probate valuation at the time of your FiL's death.

yellowbelle

That wont really help - as the property was valued as a whole. We know the figures for the whole house and garden - but part of the garden is now separated as a building plot and the two are being marketed separately.

AdrianC

No, but your EA should be able to give you an indication of how it's affecting the value of the property.

yellowbelle

The estate agent isnt really. When we got valuations we asked for valuations for the whole thing - house and garden. Also one for house alone and one for building plot. If we were selling as a whole - then the price given was around £500k House on its own - 450k
Land alone with planning £225k so it conflicts a bit. We already have an offer of £225 for the land which we have just accepted. The current marketing of the house is at £465k and the agent expects to get somewhere in that region. So we can't just deduct one from the other to get a figure. The point I am trying to make is - how can we get a figure as to what the land with planning would have been worth when we inherited it 8 years ago so that we can compare the selling price with the gain if you see what I mean. Thanks for taking time to reply.

SmashedAvacado

you are doing the wrong calculation i think

the gain was made once you got planning which presumably was since you owned it not before (and not before) so the planning gain is part of your capital gain. The value you need is the value as a garden before - which presumably isnt going to be that much.

yellowbelle

I see - now you have said that - it makes sense - thanks

Tom99

[FONT=Verdana, sans-serif]Assuming you sell the plot before the house then I think the plot is treated as a part disposal.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]To work out the apportionment of your acquisition costs you do that by comparing the sale price of the plot with the value of the part remaining.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT]eg [FONT=Verdana, sans-serif]%age represented by plot[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]225/(225+450)= 33.33%[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]So basically 1/3rd of your purchase price (probate value) related to the part you have sold[/FONT]
[FONT=Verdana, sans-serif]The three of you own 50% and you each have £11,700 CGT allowance so maybe the bill will not be too high.[/FONT]

[FONT=Verdana, sans-serif]I think you will also be liable to CGT when the house sells.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]I am not sure about the CGT on your MIL's 50%. It has not been her principal private residence for 18mths so maybe she will not benefit from the garden building plot exemption?[/FONT]