CGT on transfer of land
Discussion
Strange one if anyone can give some slight guidance.
A plot of land is owned by 50% father and 50% trust for son.
Father has been living on land for 10+years, so they are looking at going through planning process so son can build a house on land.
Ignoring all the likelihoods of planning or not, and just looking at the CGT implications.
Is it better to transfer full ownership across to son before planning (which will reduce likelihood of getting planning). Or, get planning with father name, then once planning has been done transfer to son.
Land value will likely rise from £15k at the moment for less than one acre, to about £175k at a complete guess.
On transfer, will father or son have CGT liability due to increase in value?
A plot of land is owned by 50% father and 50% trust for son.
Father has been living on land for 10+years, so they are looking at going through planning process so son can build a house on land.
Ignoring all the likelihoods of planning or not, and just looking at the CGT implications.
Is it better to transfer full ownership across to son before planning (which will reduce likelihood of getting planning). Or, get planning with father name, then once planning has been done transfer to son.
Land value will likely rise from £15k at the moment for less than one acre, to about £175k at a complete guess.
On transfer, will father or son have CGT liability due to increase in value?
joestifff said:
Strange one if anyone can give some slight guidance.
A plot of land is owned by 50% father and 50% trust for son.
Father has been living on land for 10+years, so they are looking at going through planning process so son can build a house on land.
Ignoring all the likelihoods of planning or not, and just looking at the CGT implications.
Is it better to transfer full ownership across to son before planning (which will reduce likelihood of getting planning). Or, get planning with father name, then once planning has been done transfer to son.
Land value will likely rise from £15k at the moment for less than one acre, to about £175k at a complete guess.
On transfer, will father or son have CGT liability due to increase in value?
I'm looking at doing something similar.A plot of land is owned by 50% father and 50% trust for son.
Father has been living on land for 10+years, so they are looking at going through planning process so son can build a house on land.
Ignoring all the likelihoods of planning or not, and just looking at the CGT implications.
Is it better to transfer full ownership across to son before planning (which will reduce likelihood of getting planning). Or, get planning with father name, then once planning has been done transfer to son.
Land value will likely rise from £15k at the moment for less than one acre, to about £175k at a complete guess.
On transfer, will father or son have CGT liability due to increase in value?
As far as I could see, the best way to avoid CGT is for the owner to build the house, then live in it as his Principal Primary Residence for say 6 months. (No CGT to pay so far). You can also live in the house.
Then the house is transferred to you for no consideration (i.e. free). This does not incur CGT or stamp duty. It is now your Principal Primary Residence. (assuming you havent already got a house).
So no CGT to pay but there is a risk of inheritance tax being payable if the gift is within 7 years of death.
Could be right, could be wrong but it looked viable. I'd check the process with a lawyer before I did anything as the tax bills could be rather large if you (or I) get it wrong.
If it’s already in trust, how does it get transferred back to the father? What type of trust is it? The trustees will normally be subject to any tax when it passes to the beneficiary. So maybe the question is “when should the trustees pass the assets to the beneficiary, pre or post planning?”
rotarymazda said:
I'm looking at doing something similar.
As far as I could see, the best way to avoid CGT is for the owner to build the house, then live in it as his Principal Primary Residence for say 6 months. (No CGT to pay so far). You can also live in the house.
Then the house is transferred to you for no consideration (i.e. free). This does not incur CGT or stamp duty. It is now your Principal Primary Residence. (assuming you havent already got a house).
So no CGT to pay but there is a risk of inheritance tax being payable if the gift is within 7 years of death.
Could be right, could be wrong but it looked viable. I'd check the process with a lawyer before I did anything as the tax bills could be rather large if you (or I) get it wrong.
Moving into a house does not automatically magically turn it into your main residence - especially if you still have a property that has been your main residence and you have not disposed of it. I presume that the person moving into the new property in an effort to create "main residency status" in that property will still have that previous property to move back into. As far as I could see, the best way to avoid CGT is for the owner to build the house, then live in it as his Principal Primary Residence for say 6 months. (No CGT to pay so far). You can also live in the house.
Then the house is transferred to you for no consideration (i.e. free). This does not incur CGT or stamp duty. It is now your Principal Primary Residence. (assuming you havent already got a house).
So no CGT to pay but there is a risk of inheritance tax being payable if the gift is within 7 years of death.
Could be right, could be wrong but it looked viable. I'd check the process with a lawyer before I did anything as the tax bills could be rather large if you (or I) get it wrong.
Indeed you can - but that is a formal process that the OP would need to instigate in order to swap his main residence over. Once that is done, his current main residence would stop being his main residence and that then would be exposed to CGT.
Switching main residencies is an option, but it must be done carefully.
Switching main residencies is an option, but it must be done carefully.
joestifff said:
Is it better to transfer full ownership across to son before planning (which will reduce likelihood of getting planning). Or, get planning with father name, then once planning has been done transfer to son.
Sorry, just a small point on the planning (the detail of which is irrelevant to your question), but the name of the applicant is irrelevant on the planning application. The land get's the consent, not the land owner/applicant. I could apply for planning on your father's land (although I'd be obliged to tell him as landowner).There might be a Section 106 that comes out of any planning consent and that is signed by the landowner, but this can be assignable if required.
Not looking to complicate things or pry into the detail. It just sounded like you were going to particular lengths worrying/constructing things on the basis of the name of the applicant that's all, when it's irrelevant.
I thought the option to elect had been lost at the last budget and main residence will now be according to the facts in each case.
I think if you move in for 6 months and then return to your previous residence you won’t establish this as a main residence.
The test iirc is a degree of permanence. You must truly intend the move to be your main residence for the foreseeable future.
Of course plans change ... if you’ve sold your previous residence very difficult to prove otherwise. Likewise kids moving schools etc.
I think if you move in for 6 months and then return to your previous residence you won’t establish this as a main residence.
The test iirc is a degree of permanence. You must truly intend the move to be your main residence for the foreseeable future.
Of course plans change ... if you’ve sold your previous residence very difficult to prove otherwise. Likewise kids moving schools etc.
pilotoscot said:
I thought the option to elect had been lost at the last budget and main residence will now be according to the facts in each case.
I think if you move in for 6 months and then return to your previous residence you won’t establish this as a main residence.
The test iirc is a degree of permanence. You must truly intend the move to be your main residence for the foreseeable future.
Of course plans change ... if you’ve sold your previous residence very difficult to prove otherwise. Likewise kids moving schools etc.
S222(5) TCGA 1992. I think if you move in for 6 months and then return to your previous residence you won’t establish this as a main residence.
The test iirc is a degree of permanence. You must truly intend the move to be your main residence for the foreseeable future.
Of course plans change ... if you’ve sold your previous residence very difficult to prove otherwise. Likewise kids moving schools etc.
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