Capital Gains Tax allowable deductions on sale of land

ljayljay

I have posted this on the HMRC community forum but have yet to receive a reply, so just checking if any one here can advise on the following.

I jointly inherited a plot of land some years ago & have just accepted an offer that will be liable to CGT. I would appreciate some advice on what would count as allowable deductions. 

I am assuming estate agent and solicitor fees for sale can be deducted. Also as the value has been enhanced due to granting of planning permission, I believe that the architect, planning application and associated surveyor, environmental reports can also be deducted. 

I would appreciate confirmation that my understanding as above is correct. 

However, as the land being sold is not local I am now also wondering if it would be legitimate to deduct my expenses for the costs involved in meeting the architect & estate agent to discuss & market the land. This would involve 3 overnight trips, so costs would relate to accommodation, travel costs, meals etc for the duration of the visits. 

My thinking is that these visits have enabled me to add value to the land by obtaining the planning permission. Should the sale go ahead I will most likely need to complete a self assessment for 24/25 so just want to ensure that I calculate my CGT liability accurately.

sheramber

A joint inheritance, are you selling your share of the land?

Did the joint inheritor contribute to the planning costs?

ljayljay

Thanks, selling all of the land. Owned by myself & 2 others so everything will be distributed equally. The costs were also shared.
NB only a small rural plot so the gain will not be significant after fees, even with the planning permission. Hence my reasons to ensure all costs are accounted for.

Keep_pedalling

I very much doubt whether you travelling and accommodation costs can be used to offset your gain.

Jeremy535897

The base cost will be your share o0f the value agreed for probate purposes on the death of the person who willed it to you. You can add any enhancements that meet these tests:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15180
Planning permission and the costs of obtaining it would normally be deductible if it enhanced the value.
Costs of sale deductions are limited by statute. See:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15250
They won't include travel and accommodation.
It is conceivable that the development element of the profit could be subject to income tax rather than capital gains tax, but probably unlikely.

ljayljay

An update -

Whilst posting the above I also enquired with HMRC & have now received the response below.

CG15160 - Expenditure: categories of allowable expenditure

TCGA92/S38 (1)

Except where there is specific provision to the contrary, allowable expenditure is restricted to sums for

• acquiring the asset
• creating the asset
• enhancing its value
• establishing, preserving or defending title to or rights over the asset
• incidental costs of acquisition and disposal.

So they have not specifically declined my query about deducting incidental expenses. However, to the contrary I read from the points above that 'enhancing its value' & 'incidental costs on disposal' can be claimed. 

Organising meetings with Architect, planning, agents etc is covered in both of these. Especially bearing in mind that the land I am selling is not local & therefore my incidental costs are unavoidable with the sale benefitting from a CGT liability.

I have not completed a self assessment for a while but when the time comes is there a specific part that requires each deduction to be listed i.e. Solicitor, agent fees etc? If so I was thinking I could enter all my deductions in good faith & cross reference with their own manual guidance above. If on further checking HMRC do not accept my reasoning they can bill me for the additional CGT. 

Would this not seem reasonable?

Jeremy535897

Money spent on enhancements may include costs like travel, but incidental costs on disposal are restricted to the fees themselves and do not include travel, accommodation or telephone costs etc.
SA108 for 2023/24 is here, with notes:
https://www.gov.uk/government/publications/self-assessment-capital-gains-summary-sa108
You can set out more detail if you want in the white space, or your tax return software may have a pro forma computation.

ljayljay

Thanks for the link. 

I should have realised this info would be available on the gov.uk site as I've been on it enough times.

Although I find the notes around incidental allowable costs less than helpful as it states -

Allowable costs
For Capital Gains Tax purposes, you deduct
your costs to work out the gain or loss on the
sale or disposal of an asset. Only some costs are
allowable. These include:
• the price paid to buy the asset
• the costs of any improvements made to your asset
– but they must be reflected in the asset when you
dispose of it
• incidental costs of acquiring or disposing of
the asset, such as Stamp Duty or Stamp Duty
Land Tax

And the notes for Part 16 are even less informative -

Box 16 Allowable costs (including
purchase price)
Put your total allowable costs in box 16.

Under incidental costs for disposing the asset it does not even mention the most obvious costs i.e. legal & agent fees. By using the phrase 'such as' leaves it open to individual interpretation. I still haven't sold the land so will have all year to work it out or maybe 2 years if sale drags on post April. The extra information box you mention will be useful to ensure that I keep HMRC fully informed of my calculations.

Jeremy535897

Start with the law:
https://www.legislation.gov.uk/ukpga/1992/12/section/38
Then refer to the manuals Don't just look at CG15160 and 15180 but read all the sections likely to be relevant. Read any cases referred to.
Then read the tax return notes for specific advice on where to put things etc.