Capital Gains Tax On Gift Of Garden Land

[JohnnyJekyll]

My parents own a house (mortgage free) worth about £650k. The land is about 1/4 acre in size. It has been their principle private residence since 1984. They do not own any other property. The house has a garden big enough to build a second house on, and my parents have successfully gained planning permission to build the house. Our plan is now for my parents to gift me the garden land and I am going to build the house for my family and I to live in as my own principle private residence.

I understand fully about inheritance tax and the 7 year rule, and also that stamp duty will not be due because it’s a gift. But may I ask:

1) Is either myself or my parents subject to capital gains tax at all? My hunch is no because:
a) They are gifting me part of their PPR to be my PPR, and:
b) I will be selling my current property (the only property I own) during the build process. Which should be fine because I believe I would need to sell my current property within 18 months from the point where the new house is finished before I’m liable for CGT.

Of course, best to check if I’m correct on this. Furthermore, may I ask:

2) When is the best time to transfer the land? I’m thinking ASAP to get the 7 year IHT clock ticking.

3) What are the actual steps to transferring the land into my name (e.g. transfer at land registry / notifying HMRC)? I'm presuming it can be transferred into both mine and my wife's name (tenants in common) as we will jointly own the house together.

4) I’ll probably need a professional to help with the land transfer as I’ve never done it before. What type of professional do I actually need? And what are the typical charges for this? I’m based in the South East.

Thanks very much in advance.

[JohnnyJekyll]

Update. I've done some further research on this, and have come across the Government Private Residence Relief (link below):

https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2017--2

Am I reading this correctly? It seems my parents are entitled to full CGT relief where all the following conditions are met (which they all are):

1) The dwelling house has been my parents only and main residence throughout their period of ownership.
2) My parents have not been absent other than normal holidays over the years.
3) The garden including the buildings on them are not greater than the permitted area (which is half a hectare).
4) No part of their home has been used exclusively for business purposes during their period of ownership.

Comments (including agree or disagree) are much appreciated?

[AGoodman]

Yes, PPR should apply. It is irrelevant what use you are making of it.
You need a solicitor to make the transfer, they will likely need to split the existing title (Each parcel of land has a reference number, you will need to apply to the Land Registry to split the parcel into two and create a new title with a new number).
I'm not sure how much it will cost - you will need a plan for the Land Registry and I'm not sure how detailed this will need to be. I would be surprised if the legal part was more than £1,500-2,000.

Are you sure you want to be tenants in common? That is kind of the alternative to joint ownership rather than the same. I suspect you want to be joint owners. The difference is essentially that if one of you dies, the property automatically (and easily) passes to a joint owner. If the property is held as tenants in common then the half (or other share) belonging to the deceased passes in accordance with their will or (if no will) intestacy rules.

Yes, early gifts always better for IHT.

[JohnnyJekyll]

Thanks very much for the reply AGoodman. One more question if I may. Would my parents need to inform HMRC in any way about the Private Residence Relief and that capital gains tax should not apply to them transferring land? My mum is an American citizen and does not work. My dad is retired 7 years and pays tax on his pension at source (does not submit any annual self assessments). Thanks