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Where Taxpayers and Advisers Meet

CGT on land and residential property

gmw
Posts:2
Joined:Wed Sep 05, 2018 1:39 pm
CGT on land and residential property

Postby gmw » Wed Sep 05, 2018 8:59 pm

I would appreciate some guidance on how I would calculate capital gain.

I purchased a residential property which is not my home. I then purchased a piece of neighbouring land which is non-residential. Should I then want to combine some of the garden from the residential property with the piece of neighbouring land, I would like to understand the amount of capital gains that I have made. I have provided examples below with some imaginary figures.

Scenario 1
Residential Property purchased at £140,000
Land purchased at £7,000

Combined land and garden sold for £20,000

Therefore, is the capital gain £13,000, or is the capital gain reduced by using some of the £140,000? If so how is the amount worked out?

In this scenario how would this affect the capital gains made on the property if it was sold at a later date? i.e. would any capital gains made on the property be based on the original £140,000 purchase price, or a revaluation at the time of the land sale?

Scenario 2
Residential Property purchased at £140,000
Land purchased at £7,000

Residential Property built on land at a cost of £100,000 and sold for £150,000

Again, how would this affect the capital gains made on the original £140,000 property if it was sold at a later date?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT on land and residential property

Postby maths » Thu Sep 06, 2018 5:32 pm

Scenario 1

It may well be that income tax not capital gains tax applies to any gain/profit on sale as your intention seems to be to purchase land/property with a view to reselling at a profit.

If CGT applies then the gain will be 20k less 7k less an apportionment of the 140k. The apportionment will depend upon various valuation factors.

Scenario 2

As for above with cost increased by 100k build.


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