Tax on payment from a company....

Ciprico

I am involved in a property deal where I am selling part of my garden which contains some outbuildings, to a developer.

They are paying for the land, which is CGT exempt as part of my main residence curtilege, but they are also giving me a few thousand pounds to compensate
for losing the outbuildings. (essentially to replace if I decide to).

They are not happy to inflate the cost of the land to include the this amount (around £30k)

Would this separate payment be taxable...? and if so would it be income tax or capital gain, or something else.....

Many Thanks if anyone can answer...

jimmo

In law land includes any buildings on it.

CG70205 - Capital Gains Manual - HMRC internal manual - GOV.UK (www.gov.uk)

 

I am not clever enough to suggest why it may be advantageous, commercially or taxwise, to your purchaser to label payment for the land and "compensation" separately but I'm not sure it is any concern of yours anyway.

You will be selling the land (including the buildings on it) and receiving 2 payments.

 

You just need to add those 2 sums together and deduct any legal costs to determine your proceeds of sale and the amount of main residence relief you can claim.

 

Have you run this by your solicitor?

NorthYorkie

Was the total area of your house and land, before the sale, less than half an hectare?

Ciprico

Yes....about an acre.. 

NorthYorkie

I asked because the exemption is automatic if the total is less than 1/2 hectare. An area greater than that can be exempt if the excess is required for the reasonable enjoyment of the residence. However if part of that excess is sold whilst retaining the house, the Revenue often seek to deny the exemption of the grounds that the sale proves that the excess was not required for the reasonable enjoyment of the house.
Just a thought.