CGT on sale of part of garden?

by **samtobuk** on Sat Feb 04, 2012 10:51 pm

Am considering selling off a small part (20msq) of an area of land adjacent to my house. It is not directly attached to the house but would be classified as garden and is not agricultural land.

Do you have to pay capital gains on land such as this? We have owned the house for about a year, and all the land came with the house purchase so was not bought separately. The value of the land is around £20k. If tax is payable, what would it be and does any relief on tax amounts count per individual (i.e. if as a couple we have £10k exemption each, that would cover the whole amount) or is it effectively 'per household'?

Thanks in advance for any advice.

by **mullet** on Sat Feb 04, 2012 11:10 pm

The simple answer is that there is no CGT because you are selling for £20,000 and your two annual exempt amounts exceed this. But it may well be exempt for another reason. What is the total size of your plot in square metres? And is all of the land garden (an area set aside for the cultivation of fruit, flowers or vegetables) or grounds (an area serving chiefly for ornament or recreation)?

by **samtobuk** on Sat Feb 04, 2012 11:20 pm

Thanks for the reply. It could be possible that we try to push for £25K, so if we can answer the second part that would help so we know if it is worth pushing for more, or if £25k would effectively mean £20K in the pocket (or near enough) if CGT does apply.

Area is 20 square meters.The land is not currently used and so looks like scrub land for want of a better description, but is only separated from our main back garden by a small lane (owned by highways agency). I'm not sure what defines usage (recreation or cultivation), you could use for either and as yet it has not been 'developed' for either. A small portion has been made into hard standing for parking.

by **mullet** on Sat Feb 04, 2012 11:50 pm

I meant the total plot size as in the house, garden and the piece of land that you are planning to sell.

by **samtobuk** on Sun Feb 05, 2012 12:22 am

Ah, ok, sorry. Not sure exactly on total size, bit tricky as is split into three pieces, but would estimate around 700square meters in total.

by **mullet** on Sun Feb 05, 2012 8:46 am

As long as the total plot size is 5,000 sq metres or below, then any area of garden or grounds disposed of is covered by private residence relief. In strictness you each need to declare your half share of the disposal proceeds, less disposal costs, less a proportion of the original cost, then less private residence relief to show a nil gain. But if you are not already in the self assessment system you may feel that this is a waste of time, as whichever way you look at it you have no tax to pay.

by **pqtaxation** on Sun Feb 05, 2012 11:35 am

mullet wrote:As long as the total plot size is 5,000 sq metres or below, then any area of garden or grounds disposed of is covered by private residence relief.

In strictness you each need to declare your half share of the disposal proceeds, less disposal costs, less a proportion of the original cost, then less private residence relief to show a nil gain. ....

If gross disposal proceeds are only aout £10k each is there such a "strictness"? --aren't they below 4* annual exempt amount or £42,400.

by **maths** on Sun Feb 05, 2012 12:38 pm

No requirement to report capital gains arises only if the individual has no chargeable gains for the tax year AND aggregate proceeds do not exceed four time the AEA.

by **samtobuk** on Sun Feb 05, 2012 1:19 pm

Thanks for the further replies all.

So, I believe the situation is that I will not have any tax to pay because of the size of my total plot being well under 5000 sq meters (regardless of sale price being under our joint exempt amount or not?), but will have to declare the sale in self-assessment (something which I have never done before) as I pay income tax so do not meet both of the conditions described?

I presume 'chargeable gains' covers income? If not, I have not sold any other 'assets' nor intend to this year, so would that mean no need to declare?

Either way, the important bit is that no tax will be applicable on the sale.

Thanks for your input everyone.

by **mullet** on Sun Feb 05, 2012 2:30 pm

Sorry to be a dissenter, but I think that this disposal should be reported. It is not the disposal of a house and garden with total plot below half a hectare, which has at all times been the only or main residence - in which case I accept that such a disposal should not be declared. This is the disposal of part of the garden, not linked to the disposal of the dwellinghouse. Further, since PRR is being used to relieve the gain, I think that it has to be shown in the return. But I accept that PRR is not subject to "claim" as such.

Otherwise, what is to stop the owner of a property with a very large garden selling an area each year for £40,000? If there was no reporting requirement, how would HMRC have the chance to challenge it? There is a requirement for disposals involving properties with more than 0.5 Ha to be declared, but that does not cover the situation where just some garden is disposed of.