CGT on Very Slow Self Build

[tug7]

Around 25 years ago we purchased land adjoining to our existing home and made it part of our garden. It had outline planning permission for a new house.

2 years later we decided to build the new house but it took rather longer than we expected and we believe may well land us with a CGT charge. We still kept all the land as part of our garden whilst the new house was built. The new house was thus built in our garden!

Around 17 years ago on completion of the new house we sold the original house after dividing the land and moved into the new one. We took all the purchased land plus some of the original house garden with us.

I believe that the long self build construction time will leave us with a CGT liability but how do we deal with the garden changes and what event triggers the start of any CGT liability time calculation?

I believe any CGT liability calculation ends when we moved into our new build but isn't payable until we sell it.

[Dod101]

If I were you I would stay where you are until you are both (assuming you are married)
dead and the problem will then be someone else’s. It is possible then that it will be an IHT problem anyway, which may be easier to deal with.

Otherwise, I think you need to find someone who understands this area and take advice.

Dod

[scrumpyjack]

If I were you I would stay where you are until you are both (assuming you are married)
dead and the problem will then be someone else’s. It is possible then that it will be an IHT problem anyway, which may be easier to deal with.

Otherwise, I think you need to find someone who understands this area and take advice.

Dod

Being very clinical about it, if the health of one of you declines so that the probability is that that one will die first, transfer 100% ownership to that spouse. On death the CGT liability is cleared and the property passes free of CGT (and IHT) to the surviving spouse. At that point you can sell and downsize.

[tug7]

Finding someone who can answer this is not as easy as you might think.

We were hoping to move whilst there are still 2 of us.

[genou]

Around 25 years ago we purchased land adjoining to our existing home and made it part of our garden.

Clarify this please - did you combine the titles of the land, or just use it as garden.

[modellingman]

I suspect you need to find a good tax adviser to help you navigate your way through this. The legal rules on CGT for residential property have changed a fair bit over the years: for example, relief once applied to the last 36 months of ownership of a residential property, then it went down to 18 months and now it is only 9 months.

There is a 24 month exemption that might apply to your situation - see Section 223ZA of the Taxation of Chargeable Gains Act 1992. However, I am not an expert on this and how it interacts with your situation.

It strikes me that there are a couple of other complications:

• the additional bit of garden added to the new house represents a "cost" in the sense that it may well have reduced the selling price of the old house compared to what it would have been with all its original garden. However, you would have to estimate that cost and determine whether it can legitimately be included as part of the acquisition cost (the additional land purchase, construction, etc. costs) for determining your gain if/when you dispose of the new house
• property gains can usually be time-apportioned to split into relieved and non-relieved elements - so I understand why you are asking about when the clock starts. In some circumstances though this can be avoided by using a market value at a particular time point - the obvious one being the market value of the new home at the point at which you either moved in or sold the old one. The situation I do know about where a market value can be used instead of time apportionment is non-resident disposal of UK property. Whether the rules provide for this type of approach in your case is something you would would need to determine for yourself and even if they do, determining what that market value was a good few years ago might be still be challenging

Good luck.

modellingman

[tug7]

Around 25 years ago we purchased land adjoining to our existing home and made it part of our garden.

Clarify this please - did you combine the titles of the land, or just use it as garden.

I am sorry about the delay in providing the information but I have been trying to be sure of the correct answer and I am still unsure.

I gather that it makes a difference but what?

[genou]

Clarify this please - did you combine the titles of the land, or just use it as garden.

I am sorry about the delay in providing the information but I have been trying to be sure of the correct answer and I am still unsure.

I gather that it makes a difference but what?

I'm not absolutely sure that it does make a difference. My thinking is that the reason CGT would happen at all is that putting a new house on part of the grounds of your existing house brings into play the "permitted area" rules - https://www.gov.uk/government/publicati ... elief-2020 .

If the land was never part of the house landholding, then that's not an issue. So you might be completely within the PPR rules. But there's a deal of handwaving here from me - you do need proper advice, but I'd guess this is a question the advisor will ask, and the Land Registry will know.

[Charlottesquare]

An accountant is likely your friend here, if the proportionate time based gain is significant it is likely worth talking with one.

Do ensure you have all facts neatly typed up, dates, sums expended, planning docs/warrants/completions etc, also a plan of the two land areas is likely useful to allow them to check lanes etc/whether extra area can be considered as garden etc (must admit struggling to see amenity of use as a garden whilst it was a building site)

It is likely no gain liable to tax on the sale of original house however as part of original garden ground was retained it would be useful if an apportionment of the initial house base cost had been made on that sale, maybe a (A/(A+B)) calc, if so let accountant see this but I strongly suspect no comps were done as presumably nothing featured on a tax return.