Capital Gains Question for property over 5000m2

safara

Hiya All,


I have a question about Capital Gains Tax if I sell my house.


I understand that as my property is my principal residence I would normally qualify for PPR - apart from one issue with, The bit in the https://www.gov.uk/tax-sell-home page that says :-


"The grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total"


This is an issue as the property has a bit of steep woodland at the back that brings the area of the property to about 2.5 Acres.


When I answer the questions on the .gov form thing, it says



"Because your grounds are bigger than 5,000 square metres you may not get relief for the whole area."


Does this mean that I can assign the 5000m2 portion of the property that has the house on as permitted for PPR, and the section of woodland is the bit liable for CGT?
IE, the Gain would be the difference between the value of the woodland portion of the purchase price vs the woodland portion of the sale price?

Say, an acre of woodland has gone up a grand in 5 years. Which will be a lesser gain that the bit of the property that has the house on it?


Or does it mean that PPR is not available for the whole property as it is more than 5000m2?


Cheers :beer:

00ec25

the 0.5 hectare is what is called the permitted area
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64800

in overly simple terms the permitted area gets full PRR. Land in excess of that does not.

BUT

as with all tax, you are expected to self assess and declare accordingly
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64807

the boundaries of the permitted area are not as simple as knocking 0.5 off the total land you own. There can often be disputes between the owner and HMRC as to what is in or out of the permitted area. Toi resolve that there is a statutory test which will involve a district valuer acting for HMRC in deciding what they accept compared to what you have claimed both in terms of size and location of the permitted area :
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64818

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64827

Personally I'd expect you to fail if you claim the woodland is part of an extended permitted area. The test is summarised as:
“The statute test requires looking at the dwelling-house and determine that area of land which is “required for the reasonable enjoyment” of the dwelling-house as a residence, having regard to “the size and character of the dwelling-house”.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64819

I would recommend you get an accountant experienced in this specific area of taxation (not a general high street accountant). You may also need to engage your own valuer if you want to argue over woodland valuation because, for example, it may have inherent value for development, not just "woodland" and/or to take your case to a Valuation Tribunal

safara

Many thanks for the reply 00ec25


As the property is in a national park, and on the side of a steep valley the development potential is practically nil.


But from what you say, the area of the property around the house (5000m2) is probably exempt, and the woodland up the back, if not deemed "reasonable enjoyment", may be subject to CGT.


And, unless I get third party assistance will be subject to the HMRC Valuation difference of the value of the woodland bit on purchase vs new sale price.


And I will need to self assess following the sale, and then it is up to HMRC if they want to question my assessment?