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Where Taxpayers and Advisers Meet

Selling land or building tax concern

duane9
Posts:6
Joined:Wed Aug 19, 2015 3:18 pm
Selling land or building tax concern

Postby duane9 » Wed Aug 19, 2015 3:32 pm

Hi there I’m wondering if there are any good people out there who could help me. I bought a house with a parcel of land which I have just gained planning consent on.
The property & land we live in is in my wife’s name and I already own a small property in my name.

I’m yet to split the land off but the estimated value is c. £80k as a parcel of land. I have 2 main options.

I have already agreed a one 4 bed detached house estimate selling price £185k or a pair of semi estimated £120k each £240K total (just waiting for planning permission looks hopeful).

I do not know what to do with it as I'm concerned about tax implications. I have 2 options.

1. Sell the land with planning consent for a pair of semidetached dwellings (TBC) or one detached dwelling on (planning confirmed).
2. Build the houses myself and either rent them or sell them, whichever is the most tax efficient way. I was hoping to sell one and rent the other semi-detached.

But I’m concerned on CGT payable on either option. Admittedly it’s a nice dilemma to have. Any help is so appreciated.

Thank you in advance.
Duane

pawncob
Posts:4573
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Selling land or building tax concern

Postby pawncob » Wed Aug 19, 2015 6:33 pm

CGT payable on 1.
Income Tax payable on the development profits.

Take your pick.
With a pinch of salt take what I say, but don't exceed your RDA

Peter D
Posts:10668
Joined:Wed Aug 06, 2008 3:37 pm

Re: Selling land or building tax concern

Postby Peter D » Wed Aug 19, 2015 6:44 pm

Tell us more. If this property and land is your wifes PPR then the land, depending on the size may be except Tell us the total size and the size you intend to sell.
You may wish to consider putting the package is both you names before you sign any contracts. Regards Peter

duane9
Posts:6
Joined:Wed Aug 19, 2015 3:18 pm

Re: Selling land or building tax concern

Postby duane9 » Thu Aug 20, 2015 1:31 pm

Thank you Petter for your reply.

The land size is 25m depth x 18.5m width.
Value of land with planning for 1 x 4 bed detached = £60-70k - value once completed of house on plot £180k

but im hoping to get planning for 2 pair of semis plot worth £80-90k - value once completed £120k per semi detached house. (should know in the next month)

i need to understand if its worth the hassle/trouble of building myself if I will pax much tax etc or selling the land but tehn concerend if I will get taxed on the income generated by the land sale.

happy to take any sugesstions advice.
Thank you.
Duane

pawncob
Posts:4573
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Selling land or building tax concern

Postby pawncob » Thu Aug 20, 2015 2:46 pm

Can you clarify what is owned?
Wife owns house in own name.
You own house in your name.
Is the property under discussion the one owned by your wife or a separate property?
With a pinch of salt take what I say, but don't exceed your RDA

duane9
Posts:6
Joined:Wed Aug 19, 2015 3:18 pm

Re: Selling land or building tax concern

Postby duane9 » Thu Aug 20, 2015 3:30 pm

The house I currently live in with the plot of land (in the garden) is owned by my wife. We have yet to split the land/plot from the deeds or bank as there is a mortgage on it. This is the property I'm talking about. We both live in it now.

I have another proerty in my name (which is being rented).

Cheers

pawncob
Posts:4573
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Selling land or building tax concern

Postby pawncob » Thu Aug 20, 2015 6:09 pm

If it's your wife's PPR then it's covered.

http://www.hmrc.gov.uk/manuals/cgmanual/CG64815.htm

et al.
With a pinch of salt take what I say, but don't exceed your RDA

duane9
Posts:6
Joined:Wed Aug 19, 2015 3:18 pm

Re: Selling land or building tax concern

Postby duane9 » Fri Aug 21, 2015 9:07 am

That's really helpful thank you pawncob - probably the best option I think however going back to option 2 which is build then sell would the development profits exclude the build costs and value of the land or just the build costs? thanks

pawncob
Posts:4573
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Selling land or building tax concern

Postby pawncob » Fri Aug 21, 2015 9:54 am

You bring the land cost in at valuation. The "gain" is between purchase and disposal values.
With a pinch of salt take what I say, but don't exceed your RDA

duane9
Posts:6
Joined:Wed Aug 19, 2015 3:18 pm

Re: Selling land or building tax concern

Postby duane9 » Fri Aug 21, 2015 10:58 am

Great so that means if the land is valued at £80k we take that off the total and the build would be £100k so we only pay tax on the profit over £180k if the house sold for more?


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