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Where Taxpayers and Advisers Meet

Land sale

Posts: 1
Joined: Fri Nov 30, 2018 12:15 pm

Land sale

Postby wainwrightwalker » Fri Nov 30, 2018 12:23 pm

My uncle was a farmer and following his death a few years back, it was stated in his will that if any of his farmland was subsequently sold for development I would be entitled to a proportion of the uplift in land value. Although the farm and all its land was left to my cousin (my uncle’s son) he was not particularly happy about this and thus a deed of covenant was drawn up and signed in order to further ratify this agreement.

It has subsequently transpired that my cousin is in advance negotiations to sell a proportion of this land and thus it is highly probable that I will receive a significant windfall.

At this point my cousin is not overly happy that I will be sharing in this and thus it has become extremely difficult to obtain much useful information from him. I suspect that he will contact me again at some point as the deed of covenant does require that I have to provide written consent for the sale.

My question then is what type of tax will I be subject to on receipt of this income, if at all? For instance if the developer pays my cousin is it he who is taxable on the full amount, following which I will receive my percentage of this amount (as per the terms of the will/deed of covenant) and as it has already been taxed will it be tax free in my hands? Alternatively does he pay tax on the full amount then pay me whereupon I am also am taxed on the full amount of my share (seems a bit unfair) or does my cousin receive the gross amount, pay me my share and then we both pay whatever tax is due on the net amounts actually received?

I’m confused and I have to admit I don’t really want to further antagonise my cousin at this point by asking him any further questions; therefore, any comments/advice would be greatly appreciated.

Posts: 437
Joined: Fri Aug 07, 2015 2:17 pm

Re: Land sale

Postby SteLacca » Fri Nov 30, 2018 1:37 pm

My own view is that you will be liable for capital gains tax on the difference between the original acquisition cost to you and the proceeds of sale attributable to you. The difficulty you will have will be establishing the base cost.

If it was a straightforward inheritance and sale then probate value would be used, In your circumstances, however, things are much more complicated. You probably need to see a specialist rather than relying on a forum.

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