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Capital Gains Tax on Land

My husband and I are both British, and resident in the UK, although I lived many years in Belgium, was married for a short time to a Belgian, thus also acquired Belgian nationality.

In 1989, my English husband and I bought a plot of building land in Belgium, with the intention of building a home on it, and moving to Belgium. For other family reasons, this did not materialise. Now in our mid-to-late 70s we decided to sell it, and completion was in December 2018.

We've paid to maintain the land regularly, and paid annual Belgian taxes throughout our ownership. In Belgium, there is no CGT if you've owned the land for eight years or more.

Needless to say, we wish to minimise the amount of CGT due in the UK. We'll invest some of the proceeds in Belgium, and as we've been landlords in England for almost 30 years, we would consider buying another property if CGT could be offset in some way. We won't invest in risky ventures.

We'd welcome some specialist advice, please. Thank you in advance

Comments

  • 00ec25
    00ec25 Posts: 9,123 Forumite
    1,000 Posts Combo Breaker
    edited 1 January 2019 am31 10:35AM
    the Belgian land was not an operational business therefore you cannot claim any (business) holdover relief when it is sold, it is just an investment which is now subject to UK CGT, just the same as if you'd sold some shares or other investments you own (or your UK BTL property for that matter)

    as it is jointly owned remember the tax calculation has to be done on your respective shares, presumably 50/50, so you each get to claim the exempt allowance (18/19 rate £11,700) on your respective share and then pay tax on your respective gain taking into account your individual overall total "income" including the gain.

    neither the annual taxes nor the "maintenance" costs are items you can deduct from the gain as they are running (ie revenue) costs not capital costs.

    if you have any legal fess associated with the original purchase price and the selling prices those legal fees can be claimed. You can't claim any fees in between except possibly if you needed to get planning permission on the land after you acquired it, those "PP fees" would be part of the "purchase" cost and so claimable against the gain. If the land came with pp on it already then so be it, no further fees to claim

    as for the idea you "won't invest in risky ventures" that statement coming from someone in their 70's says too much about your understanding of, and appetite for, investment risk since you regard buying into another BTL as not being a risky venture.
  • Thank you 00ec25, for your very prompt & helpful feedback.


    Is your reference to 'overall total "income" including the gain' the question of determining if we should pay 18% or 28%.... or is there something we've overlooked?......
  • 00ec25
    00ec25 Posts: 9,123 Forumite
    1,000 Posts Combo Breaker
    Chris_Tibs wrote: »
    Is your reference to 'overall total "income" including the gain' the question of determining if we should pay 18% or 28%.... or is there something we've overlooked?......
    yes, the calculation of how much at each rate
  • I don't know how to "quote" from a previous message but in response to this:
    neither the annual taxes nor the "maintenance" costs are items you can deduct from the gain as they are running (ie revenue) costs not capital costs.
    the land's never been used, or provided an income, so we've never claimed any "running costs".... The only "profit" is the gain in value, does that make a difference?



    Aaah well, being landlords has served us well - it's the one risk we know something about! :)


    Thank you for your willingness to advise.
  • 00ec25
    00ec25 Posts: 9,123 Forumite
    1,000 Posts Combo Breaker
    Chris_Tibs wrote: »
    the land's never been used, or provided an income, so we've never claimed any "running costs".... The only "profit" is the gain in value, does that make a difference?
    in your first post you referred to
    We've paid to maintain the land regularly
    I was therefore labouring the point that if you thought such costs could be included in your CGT calculation to reduce your gains you would be in error and your statement above is thus correct - the taxable "profit" is the gain in value between Dec 2018 selling price (less directly associated legal fees or other selling costs) less the 1987 purchase cost (plus directly associated legal fees or other purchase costs)

    Are you confident you have the correct exchange rates to use?
    The ideal is to use the respective spot rates on date of purchase and sale, but if you will struggle with that, it is acceptable to use the monthly average rate(s) published by HMRC
  • 00ec25 - Yes, thank you, we don't have any problems with the exchange rates (even tho it started pre-€!)


    Thank you very much for your time and for sharing your knowledge! Now I feel as though we can get the bus and knowing where it's going.


    Happy New Year
    Chris Tibs
  • Tom99
    Tom99 Posts: 5,371 Forumite
    1,000 Posts Second Anniversary
    A plot of land is not a dwelling therefore I think CGT will be 10%/20% not 18%/28%.
  • Wow, thanks Tom99 - that'd be good - I'll look into that and let you know how I get on.
  • Thank you Tom99: Checked it out, and you're quite right, the rates are 10% and 20%. Very pleased about that.
  • [FONT=&quot]..... so we have CGT to pay[/FONT][FONT=&quot]. This now leads to another question, if anyone can help, please.[/FONT]
    [FONT=&quot] [/FONT]
    [FONT=&quot]In the past we’ve inherited shares as well as bought ISA investments. Subsequently, we saw the value of our investments plummet in the crash, in the hands of the professionals whom we paid to manage our funds, so it’s shaken our confidence.[/FONT]
    [FONT=&quot] [/FONT]
    [FONT=&quot]Consequently, we felt safer buying another rental house, so we sold some of the shares (I can hear you groan) some yielded gains, but the losses outweighed the gains (we declared this to HMRC at the time). We understand we can still offset these against the gains on the land.[/FONT]
    [FONT=&quot] [/FONT]
    [FONT=&quot]Amongst the shares we inherited/bought were bank shares, i.e. Lloyds, HBOS and RBS, which are now worth but a fraction of their original value. We've just hung on to them because we didn't/don't know what’s the right thing to do.[/FONT]
    [FONT=&quot] [/FONT]
    [FONT=&quot]So the questions are[/FONT]
    · [FONT=&quot]is there any point in keeping the banking shares, or should we get rid of them?[/FONT]
    · [FONT=&quot]If we sell them, can we offset the ISA losses, as well as the non-ISA losses, against the capital gains on the land?[/FONT]
    [FONT=&quot] [/FONT]
    [FONT=&quot]Running costs of the Land[/FONT]
    [FONT=&quot]We’ve understood we can only claim enhancement costs as part of the costs of the land, but not the annual maintenance expenses, as these could only be offset against property income. We didn’t have any income from the land as long as we owned it, but we do have income from the rental properties. Does this mean we could have claimed the expenses against the rental income? [/FONT]
    [FONT=&quot] [/FONT]
    [FONT=&quot]Thank you for any feedback you can offer, please.[/FONT]
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