Capital Gains Liability

KAADWD

I am in the process of selling my house and land (5acres) which we have owned for 25years. Although the land and house have separate titles they have been used for our horses and we have stables on the land. The land and house are adjacent with no separation other than a fence. We bought both at the same time and paid stamp duty on the whole.


The buyer is a developer and wants to purchase both house and land separately( they intend to sell the house on) and I have said no as it must be sold as a whole otherwise I will have to pay CGT on the land portion which could be seen as a profit of £350k.


My question is am I right, and if sold whole will I have any CGT liability considering the land size?


Many thanks for any help.


KAA

KAADWD

Just did a bit of research on this and apparently the HMRC rules are that you can sell a house and one acre CGT free if it is your home and the rest of it is liable to CGT. In this instance the current value of the field is just as amenity land at say £5k an acre as there is no planning and no applications made.


So irrespective of what is paid for the four acres CGT would be quite small after the allowances are put against it. Does this sound right? Also I am not sure of how this is assessed?



KAA

Keep_pedalling

The current value of the field is whatever the developer is going to pay for it so a darn sight more than £5k an acre.

KAADWD

Thank you for that. I must admit I thought your home was exempt from CGT. I take it that I will be liable for four acres value which is difficult to assess original value as we bought as a whole. If we sell as a whole there potentially is still a CGT libility and if this is too high then it is not worth us moving. So if we sell the land in with the house how does HMRC decide if we have to pay and how much. If say the sale was £100,000 for the four acres, as the house and one acre could be justified at £800,000, and as we are joint owners would our allowance be £24,000 plus the allowables?

00ec25

without me re-writing the whole manual, what you need to focus on is "permitted area" and the case law surrounding the "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”.

you will see that there is actual case law regarding a house and land for horses, as not unreasonably that is a very common occurrence for those wealthy enough to run horses. Whilst the limit is defined as 0.5 hectacres, (1.2 acres) exceptions can be made, but they are case by case and run the risk of HMRC legal challenge given the sums involved

the fact your land is already (and has been) fenced off will count very heavily against you since, titles further reinforcing it, segregation weakens the claim that the land is required for the house.


please read the following and then ask any questions on understanding rather than lack of reading:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64800p

uknick

You say the land and house are two separate titles, so I assume this means they are two separate entries on the Land Registry database? From what you've said, I think the developer sees them as separate transactions.

If so, how come you don't have paperwork for each purchase and as such what consideration was paid for each? If not, how have you worked out a possible £350k gain on the land part?

KAADWD

It has not happened yet. The house and land were bought by us at the same time 25 year ago. They were both bought from the same building society as mortgagees in possession. We paid stamp duty on the whole even though they were separate titles ( and the land price was below the stamp duty exemption) as our solicitor guided us at the time.


Now we have an offer of £980K and this has been divided between the house and land by the buyer. Although there is no planning he hopes to gain it in the future and we are too old to wait with an option and want to downsize. I am not sure what values he is attributing to each title and in fairness it might be £180k or worst £280k for the the land title. From his point of view is teh value of each important ??



I do not think any of the land will count into the permitted area as there is our garden fence as a boundary to the land and the field is about 1 meter lower so it is clearly defined. I realise now that CGT will be due and if the value of the land is unrealistic the HMRC will call the District Valuer in.



My calculations of the gain at worst will be £280k less original purchase price £20k less £5000 for stables built, less joint owner personal allowance £23,400 gives a gain of £231,600 at 20% CGT £46,320. If the land is £180K then the gain is £131,600 which gives £26.320 CGT. Is my take on this this about right?



Much of this outcome will depend on the buyer and I negotiating the split of the headline price over the two I guess. Now whilst these sums seem high, and probably I am not incurring much sympathy, the costs of moving and the price of property generally on our area will mean that we will be tight on financing our move. We did not know about the CGT liability, this is a worry as we bought this property to have our horses at home notas a a land investment not that this seems to matter.



Any pointers appreciated.


Thanks for the comments.

00ec25

KAADWD wrote: »

Any pointers appreciated.

an acknowledgement of the pointers you have been given would have been nice

you need to engage a professional valuer to act for you (and probably an accountant as well)

from what you have written it appears you will not have an "overage" clause included?

silvercar

CGT is 18% and 28% and those sums of money will push you into a higher rate band.

00ec25

silvercar wrote: »

CGT is 18% and 28% and those sums of money will push you into a higher rate band.

not if "it" qualifies as non residential land