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Where Taxpayers and Advisers Meet

CGT joint property venture

jimoz
Posts:22
Joined:Fri Sep 06, 2013 5:15 pm
CGT joint property venture

Postby jimoz » Thu Jan 04, 2018 6:42 pm

I have proposed a JV to the vendor of some ground. The ground is part of the vendors garden and hence qualifies for PRR. Is right size, is genuinely used for garden, isn't fenced off etc etc - ticks all the boxes. Basically its an older person (lived there ages) for whom the work of such a garden got too much and they got planning for 2 dwellings. The offer is I develop the 2 houses, then we get (sell) one each, with a modest payment made to my company by vendor reflecting the build costs being higher than the lands value.

While the vendor considers the offer there is the dreaded CGT position which could scupper things. If they sell now for 'X' no CGT and all clean cut. If I develop and they pay me 'Y' then they will get 'Z' for the house. The difference between X and Z would be around 100k, with Y being around 50k. Sorry if that all seemed a bit smoke and mirrors...

So I am wondering then - would the vendor be actively engaging in property development and liable to no PRR? would they be liable for the increase in value between it's present value and it's final value minus payment made to myself? Or would they escape CGT altogether (having read a few little snippets about contracts and the way the sale date is worded) depending on how the contract is written/deal is structured?

While the vendor will obviously be seeking independent expert advice I am just wanting to have an overview of the situation myself and be able to make suggestions as to how the deal could be structured. I'm pretty sure this wouldn't be the first instance of this type of an arrangement between a builder and 'garden' owner so hopefully someone here has experience? I'm guessing it would be a LOT simpler if the vendor planned to move into the house they keep themselves? Shame, can't see it myself!

Thanks in advance

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