Captail Gains on agricultural land

Thestump1

Hi, 

Ive recently been gifted farm land by my mother. Total value est. £400,000. After my father passed without a will. Meaning all was sorted through probate. 
Revoking my right to the estate so all could pass to my mother.

If i was to sell some of this land. With sale value of roughly £150,000.

Could i then in turn use that money to build a house. Without having to pay any tax on it. 

This house would be my primary home. 

I do not own any other residential property. Or properties outside of gifted farm. 

Farm does not cone with a residential dwelling

Bookworm105

The fact the sales proceeds are being used to fund house building does not give them exemption from CGT even if there is no residential property on the farm at present. I very much doubt you would succeed in claiming that a new build house is a business asset of the existing farm.
10 pitfalls to avoid when applying Business Asset Rollover Relief

so the real question is: how much is your gain?
Taking at face value your explanation it is land that mother now owns then she will gift it to you at market value at date of gift. By the time you sell it, it may or may not have increased in value.
I assume father's estate was too small to trigger the need to pay Inheritance tax, so HMRC have not yet "ascertained" (accepted) any land values quoted in the probate submission.
If there was a time delay between mother acquiring the land (when you revoked your share under the rules of intestacy) and her gifting it, you would also need to check if she faces CGT in her own right. For example, has she claimed holdover relief as at that point it was land forming part of the farming business.

do you plan to sell the land as agricultural or will you try for a change of use before selling and/or sell with an overage clause in place? Depending on those answers you probably need to get a professional valuer to give you the figures to use for HMRC and for the valuer to be willing to defend those figures in a tribunal if HMRC challenge them.

Thestump1

Would just be sold as agricultural land. 

Hermann

Here is a general overview of CGT & agricultural land from the CLA which is reasonably informative...

https://www.cla.org.uk/news/in-focus-capital-gains-tax-and-reliefs-explained/

Thestump1

Thank you. 
With income as a sole trader(electrician) below the £50k threshold. 
Would i be liable for 10% tax on the sale? 

As its agricultural land and not wishing to reinvest would that let me avail of the relief noted below. 

Business asset disposal relief (formerly entrepreneurs’ relief) may be claimed on the disposal of a farm or agricultural land, where it was farmed by the owner, as an alternative to claiming roll-over or hold-over relief. This may be important if after selling the farm or land, the seller does not want to reinvest in new business assets. If cash is available, the original owner may decide to pay CGT at the 10% rate in order to pass on the land to the new owner (often family members such as their children) free of any accrued gain.

Bookworm105

Thestump1 said:

Thank you. 
With income as a sole trader(electrician) below the £50k threshold. 
Would i be liable for 10% tax on the sale? 

As its agricultural land and not wishing to reinvest would that let me avail of the relief noted below. 

Business asset disposal relief (formerly entrepreneurs’ relief) may be claimed on the disposal of a farm or agricultural land, where it was farmed by the owner, as an alternative to claiming roll-over or hold-over relief. This may be important if after selling the farm or land, the seller does not want to reinvest in new business assets. If cash is available, the original owner may decide to pay CGT at the 10% rate in order to pass on the land to the new owner (often family members such as their children) free of any accrued gain.

for the sums of money involved surely there are accountants used to dealing with farms in your area who you should be paying for proper advice?

I do not consider you meet the criteria for BADR, hence I did not mention it. BADR relates to the cessation of a your farming business (you appear to be an electrician, not farmer), and also not the part disposal of bits of it. 

see 15/200 acres example here: You might be entitled to Business Asset Disposal Relief when selling your farm business

Thestump1

Im only in the idea stage. Trying to gauge if it is an avenue worth exploring. I wouldnt want to be doing it if large chunk would end uo with the tax man. 10% coukd be doable...

Hermann

Thestump1 said:

Im only in the idea stage. Trying to gauge if it is an avenue worth exploring. I wouldnt want to be doing it if large chunk would end uo with the tax man. 10% coukd be doable...

It is worth asking a professional who specialises in this area.

It shouldn't be hard to find someone who will give a free initial discussion and if you prepare well for that discussion then it should easily inform you of all you need to make a decision without a hefty spend.