This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Garden plot with planning permission

total101
Posts: 8
Joined: Sun Apr 14, 2013 12:00 pm

Garden plot with planning permission

Postby total101 » Wed Jun 19, 2019 10:58 am

We have a garden plot (approx. 1/3 acre) with planning permission for 3 local occupancy houses.
Originally we intended for one house to be for our disabled son and the other 2 to fund the build. However not done anything yet other than get planning permission, which runs out this autumn.
Looking at renewing planning permission (we are at the edge of national park), which seems to involve doing the whole planning application again.
However, we are told that we should simply start the work by installing say a drain and manhole, thereby negating the need to go through the whole planning process again...
However, from a taxation point of view what would starting the work mean?
It is my understanding that we could currently sell the garden plot with planning permission (but no works started) and the sale would be covered by our PPR allowance (ie no CGT implications).
If we were to 'start' work does that automatically mean that we are liable for CGT on any subsequent sale of the of the plot (even if we did no more work than a drain and manhole)?
Apologies, but we cannot seem to get our heads around the current rules regarding disposal of garden plots. Plus in such a rural area, we have not got easy access to tax advisors who can help.
Thanks for any helps and advice!

total101
Posts: 8
Joined: Sun Apr 14, 2013 12:00 pm

Re: Garden plot with planning permission

Postby total101 » Thu Jun 20, 2019 5:18 pm

Apologies...the total plot size of house and garden is 0.6 acres. The garden plot is currently residential curtilage.

Just wondering whether a nominal start of work (to preserve the planning permission) automatically means that we would be liable for CGT if we subsequently decided to sell the garden?

I have read lots of examples on selling gardens for development but have not seen anything that cover the above.

hendersontax
Posts: 26
Joined: Wed Jun 19, 2019 5:04 pm
Location: Manchester
Contact:

Re: Garden plot with planning permission

Postby hendersontax » Thu Jun 20, 2019 7:33 pm

Whether or not you will get private residence relief on selling part of the garden or grounds of a main residence will depend on what you are actually selling at the time you sell it - it must be "land which he has for his own occupation and enjoyment with that residence as its garden or grounds up to the permitted area".

If the land currently meets that test (and having planning permission currently does not necessarily imply otherwise), then carrying out 'nominal' work is not going to automatically mean the land is no longer 'for your own occupation and enjoyment with that residence' - but you will start to seriously weaken your argument. The fact that you are just proposing to do nominal work in order to preserve the planning permission is likely to be in your favour (as in, this would not necessarily change the 'use' of the land), but it sounds like you are trying to tread a very fine line between two sets of rules!

maths
Posts: 7562
Joined: Wed Aug 06, 2008 3:25 pm

Re: Garden plot with planning permission

Postby maths » Sun Jun 23, 2019 3:26 pm

Obtaining planning permission this should not affect any CGT charge.

However, once steps are taken involving staring construction work (which I suggest would be the case) there would be an appropriation of the plot from investment to trading stock at which time a CGT charge would arise albeit covered by private residence relief. Thereafter any gain on a future sale would be subject to income tax not CGT.

hendersontax
Posts: 26
Joined: Wed Jun 19, 2019 5:04 pm
Location: Manchester
Contact:

Re: Garden plot with planning permission

Postby hendersontax » Mon Jun 24, 2019 11:11 am

Hi @maths - I'd be interested in your thoughts on whether you think an @total101 would be necessarily be 'trading' in these circumstances? Even if there is a trade, I'd suggest that a nominal start to the construction purely in order to preserve planning permission would arguably lack the necessary intent for it to be a commencement of that trade.

Furthermore, in Mrs A Dickinson v HMRC (TC03037) the Appellant commenced groundwork for the development of a property on the grounds of her main residence but the land was held to have retained its character as "garden or grounds", on the basis that any such change in character would have needed to be "permanent or regarded as permanent".

It would still seem to be a fine line, though. If there is a trade, the use of a company should be considered.

total101
Posts: 8
Joined: Sun Apr 14, 2013 12:00 pm

Re: Garden plot with planning permission

Postby total101 » Wed Jun 26, 2019 5:34 pm

Thanks for your replies and sorry for delay in coming back (I have been away for a short break).

The original planning application for 3 local occupancy homes was intended to provide a home for my disabled youngest son (the other 2 were to sell in order to pay for the whole project). However, my wife and I are getting too old to perhaps consider such a project. So, I was considering options selling off the garden with its planning permission (to perhaps buy a flay for my son elsewhere). Specifically I need to know likely tax implications....
The easiest option to preserve the planning permission seems to be to 'start' work. However, I do not want to do this without considering the implications first.
The garden plot is part of our garden and currently houses my garage. So, even if we put in a nominal drain and manhole cover (as advised by our architect), the use and enjoyment would not change...until such time that we either start the development project OR decide to sell the garden.

It was the issue of starting some work in order to preserve planning permission that was the main concern from am income or CGT point of view.

Sorry but there are no accountants and/or tax advisors that we can find locally who seem to be able to help.

hendersontax
Posts: 26
Joined: Wed Jun 19, 2019 5:04 pm
Location: Manchester
Contact:

Re: Garden plot with planning permission

Postby hendersontax » Tue Jul 02, 2019 11:19 am

If you consider that the use/enjoyment/character of the garden would not change as a result of the nominal work (including that you have not commenced a 'trade'), then it would follow that the should be no change in whether or not the garden or grounds would qualify for private residence relief if you sold them off. I think that is the key point.

If you would like the comfort of more formal advice and you cannot find a local tax adviser to assist you, you might consider searching nationally using https://pilot-portal.tax.org.uk/utilities/ciot/find-a-member.


Return to “Property Taxation”