capital gains tax on land?

carthorse

carthorse

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If you bought a piece of land between 3 people in 2001 and sold it in 2013 for a profit of £150,000 do you have to pay capital gains tax. Two of the people do not own a house.
 
Go and see a Chartered Accountant who specialises in CGT. It may cost a bit but they will know the ways to reduce the gain if possible.
 
Yes, each person will have their own allowance to use against the portion they own. The allowance applies in the year you sell the land, it is not something that adds up for each year you have had it. So you only get to take off the allowance once, you then will pay tax on the remainder. It is not relevant that the other co-owners don't own a house. (PS I am not an expert. This is just my understanding from general knowledge and reading the doc in the link).
 
I have looked into this because my land is separate - basically you pay CGT on any property other than your primary residence and, yes, as above, you get one allowance per person no matter how long you have owned the land. You do get to deduct any capital moneys you have spent on improving the land, e.g. improving fencing (not repairing or maintaining) having services connected, making access ways, buildings etc, but not on managing or maintaining the land. I have kept a spreadsheet but some amounts I do not have receipts for. One accountant I spoke to said HMRC won't insist so long as the expenditure seems reasonable and the purpose in keeping. The gaping maw of the tax gatherers in this country gets everywhere! I'm not sure of the rate though - someone suggested it is connected to the rate at which you pay Income tax, someone else said a flat rate. Just followed the link above, it is very helpful and more up to date than the information I had been given - thanks.
Did the solicitor doing the conveyancing not mention it to you, although unlike Stamp Duty it is self declared so if you don't declare and pay it you spend the rest of your life wondering when they will catch up with you :)
 
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CGT is 28% if a higher rate tax payer or 18% otherwise. You really should get professional advice, may save you alot of money in the long term.
 
http://www.hmrc.gov.uk/helpsheets/hs292.pdf
Joint ownership
If you own land with one or more other persons, any valuation will need
to take account of this. The valuation has to be of your interest, which in this
case is an undivided share in the property. In view of the difficulties inherent
in selling such a share, this will normally mean that the value is less than
a proportionate share of the value of the entire property. Thus for a property
which is equally owned by two people, the valuation for each of them would
normally be less than one half of the value of the entire property.
We are in the middle of a CGT transfer, we have handed it over to a Chartered accountant who specialises in it, since it is so complicated and I would hae to give away more than I have to.
 
I am a Chartered Tax Adviser - basically you will all have to pay CGT on your own share of the profit. In each tax year you have an annual exemption to use against capital gains you make in that year - each person will have their own AE to use against any capital gains in that tax year. You don't need to worry about valuations if you are selling it to an unrelated third party, if you own it equally you will each pay CGT on £50k (the £150k profit split 3 ways) less your annual exemption of £10,600 or £10,900 depending on the date it was sold in 2013 (assuming that none of you have any other capital gains which have already utilised the exempt amount) so £39k ish taxable at either 18% or 28% depending on your levels of other income - 18% up to the higher rate threshold and 28% thereafter.
 
Thank you all very much.
Its stupid, if it was a house I'd pay nothing, it is my only property. We have owned it 11 years and put stables, menage and post and rail fencing up [ which I think they will allow for] but there is no allowance for inflation. I don't have the receipts for menage and stables as put up 11 years ago but have for fencing.
We could just afford a house with land if we had all the money for the land but if we pay tax then its impossible. I can understand that one person should pay as they have a house but we don't.
Oh well thank you very much anyway.
 
Is your share just in your name or with your OH? If it is in your joint names you will have two allowances to set against the gain. I would have thought the cost of the manege and stables would reduce the gain substantially. Can you get a value on how much the land would be worth without all the improvements?
 
Good idea, its in 3 names hubby, me and daughter as all put money in. I have to pay rates as I got planning permission on stables, others in the lane have the same amount of stables but pay nothing. We are thinking of moving as our horse was hit by a van this week. The lane used to be quiet but now everyone is buying bits of land and running businesses as they want planning for a house and it has become a white van nightmare road. Maybe I should run a business and get planning then wouldn't pay CGT as its a home!
 
carthorse said:
Good idea, its in 3 names hubby, me and daughter as all put money in. I have to pay rates as I got planning permission on stables, others in the lane have the same amount of stables but pay nothing. We are thinking of moving as our horse was hit by a van this week. The lane used to be quiet but now everyone is buying bits of land and running businesses as they want planning for a house and it has become a white van nightmare road. Maybe I should run a business and get planning then wouldn't pay CGT as its a home!
Click to expand...

Sorry to hear about your horse is he OK? The relief against CGT for your own home only covers the house and permitted grounds which are about an acre (half a hectare) it is possible to get relief for larger 'gardens' but only if the house requires this land for what is called reasonable enjoyment based on the size and character of the house so depending on how large the land is and what the layout is you may find that it would not all be eligible for relief even if you built a house on it and lived there. You would also only be entitled to relief for the period that it was your home so the period from purchase until you started living there would not be eligible for relief.

You should be able to take a deduction for the costs of the menage and stables even if you don't have receipts, if necessary photos/planning would show that you had put these up.
 
The tax shouldn't be that much, If it's £150,000 less fencing, menage, stables (At a guess not much change from £40k even if you did a lot yourself) so its profit of £110,000.

Split 3 ways is £37k eack, less your £11k allowance is £26k each which you have to pay tax on.

If your all basic rate tax payers you pay 18% - so only £4,700 each or £14k in total
 
If you could get planning permission and build a house on the land, you could move into, sell your old house and not pay any CGT. Then after a certain amount of time, buy another house with the the proceeds of two!

It depends on how likely it would be to get planning permission and how much this is likely to cost and how much stress you can bear!
 
£14,000 is a fortune - but you will have the money to pay it, so you just have to grin and bear it. CGT always seems a bit unfair with these sort of assets, as it was bought with money that had been taxed anyway. So it is a double tax. It could be well worth speaking to a tax expert who may be able to give you advice.
 
Will get some advice but we just couldnt afford anything else if we had to pay that amount out. Moving is expensive anyway with estate agents fees , solicitors and stamp duty so think the dream is just a dream.
I found the post about the home being the only thing thats exempt from CGT. Do people who have houses with land pay CGT. I bet they dont
 
If the land came with the house when the property was purchased and is sold with the house and used for private use then you would not pay any Capital Gains Tax provided it is the main residence. However if the land was not bought at the same time as the house but sold with the house then Capital Gains Tax may be payable on the land.
I would suggest that you approach a specialist firm of surveyors to determine if you could get planning permission for a house as this would increase the value of the land.
Please report the accident with the van on www.horseaccidents.org.uk
 
Oh I do agree £14k is huge but compared to the cost of trying to get planning on a greenfield site and build a house it's a drop in the ocean!

Sadly the longer to leave it and hang on to the land the more it'll go up in value and the more tax you'll have to pay so the longer you leave it the more the bill will be.

It might be better to bite the bullet now and get a house with land that you want then you can stop worrying about a big bill coming.
 
Thanks. I will report accident, luckily she just seems bruised and is having a week off and driver says he will pay vets fee. In July someone was not so lucky and the vehicle drove off leaving her and her horse injured. Her horse is still injured.
 
Thanks Polos mum
That is true but if we got planning my daughter could sell her house which would pay for the build.
Unfortunely the cheapest we can find anywhere near here is £500,000 with 4 acres. We have a house worth £250000 with a £100000 mortgage on and land worth about £150,000. We are old and living with my daughter so it would be just her taking on the extra expense but figures dont add up so move not on the cards.
Shame but we are luckier than most and think we might start putting up signs on the road to slow people down
Thank you all again.
 
Shame you can't move areas we bought our 4 bed house with 12 acres in South Lincs for under £300k.

Just so you know, I'm pretty sure even if you built a house on the land you'd still have to pay CGT when you sold it for the increase in value from the time you bought it to the time it became your main residence so the £14k never goes away, it just wouldn't get any bigger if you built a house.
 
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