Possible land sale and tax implications

[speedyellowrs]

Hi guys,

Wondering if any one out there can help. I've had a neighbour express interest in purchasing some land from my wife and I. We've owned the land for just over 2 years and it's in both my wife's name (not working at the moment) and mine (top rate tax payer).

I was wondering what the tax implications would be, if we were to sell at a profit, and if there is a way of (legally!) reducing CGT. We are not registered farmers but were considering doing so.

Many thanks.

[ginettag27]

I am _not_ an expert... We bought some land from our neighbours.. I think quite a bit of the cost and tax involved depends on the use of the land and also the price that it is being sold for. afaik if it's sold for 10k or less then it will be treated differently, i.e. cost less in terms of Land Registry and associated paperwork.

It's CGT that applies and you have £9,200 each. from here http://www.opsi.gov.uk/si/si2008/uksi_20080708_en_...

Here looks good http://www.reeves-neylan.com/DocLibrary/Literature...

and here http://www.hmrc.gov.uk/so/index.htm there's even a calculator

Plus here http://www.property-tax-portal.co.uk/taxquestion10...

Of course the Annual Exempt Amount is per individual but cumulative, of course.

HTH

[speedyellowrs]

Many thanks for the reply, GG27.

I'll have a read through the links. When I realise I can't understand the jargon, I'll come back and seek a translation!!

[DanX5]

Please supply more details as to what the land has been used for (i.e. is it part of your garden, agricultural land, industrial, etc) and how much land (i.e. acreage) for a start then should be able to give some advice.

[Eric Mc]

The main concern will be Capital Gains Tax. The current CGT allowance is £9,600 (not £9,200). This means, if the land is jointly held, then no CGT is payable unless the profit on disposal exceeds £19,200 (£9,600 x 2).

The profit is worked out by subtracting the disposal proceeds from the original cost. However, the original cost includes, not just the purchase price of the land but all the legal fees, stampt duties and other fees and charges incurred when buying the land. If any "enhancement" expenditure was incurred on the land during the period of ownership, that is also added on to the costs.

The sale proceeds is the actual amount received on disposal LESS legal costs and any other charges incurred by you in association with the sale.

The rate of CGT is now a flat 18% (The gain on a disposal of a business asset is limited to 10% subject to a lifetime limit of business disposals of £1 million).

[speedyellowrs]

Many thanks for the clarification, Eric. That all makes sense.

Dan, the land is approximately 11 acres, that is part of my smallholding. It's agricultural land, but, as I say, we're not registered with DEFRA as farmers.

[monthefish]

Could you (legitimately?) sell the land off piece by piece? i.e one parcel (of value £19,200) a year?

[Eric Mc]

The Revenue looks very carefully at Part Disposals. If an asset is disposed of piecemeal and it looks like this was done purely with tax saving in mind, they will ignore the series of transactions and treat the combined disposals as a single transactions.

There is legislation in the Capital Gains Tax regulations covering theze types of "whizzes".

[monthefish]

Eric Mc said:

The Revenue looks very carefully at Part Disposals. If an asset is disposed of piecemeal and it looks like this was done purely with tax saving in mind, they will ignore the series of transactions and treat the combined disposals as a single transactions.

There is legislation in the Capital Gains Tax regulations covering theze types of "whizzes".

Thought that might be the case. Thanks for clarifying.