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Where Taxpayers and Advisers Meet

What value?

Ian McTernan CTA
Posts: 1232
Joined: Wed Aug 06, 2008 3:02 pm
Location: Bedford
Contact:

What value?

Postby Ian McTernan CTA » Wed Jun 03, 2015 3:53 pm

Here's one for the property experts:

Building bought in 2010 for £300,000, trade below with residence treated as PPR above. Let's say 50/50 split in terms of floor area.

Planning permission has now been granted to convert the first floor, add a second floor, extend to either side whilst retaining the commercial use of the existing ground floor area.

Let's assume all the flats will be sold immediately upon completion, and that CGT is applicable to the sale proceeds.

My question is this: when apportioning the PPR relief, what valuation do we take as being the valuation applicable to determine how much CGT there is to pay? Is it the valuation prior to any planning permission being granted, or the valuation including the planning permission but before commencement of the building works, or some other value entirely?

References to HMRC manuals, base legislation, etc can be made.

Many thanks.
McTernan Associates Ltd
Chartered Tax Advisers
Bedford
Email through link on website:
http://www.imcternan.com

taxmenot
Posts: 8
Joined: Wed Jun 03, 2015 1:54 pm

Re: What value?

Postby taxmenot » Wed Jun 03, 2015 5:15 pm

Hi

If the property is being sold once the planning permission has been granted, HMRC would view to tax this on a "just and reasonable" basis and the valuation that will be used will include the planning permission.

Of course if part of the building is being used for trade, ER may be available albeit only on the business proportion of the gain.

KRs

bd6759
Posts: 3347
Joined: Sat Feb 01, 2014 3:26 pm

Re: What value?

Postby bd6759 » Wed Jun 03, 2015 10:58 pm

What flats? Extend what to either side? Covert the first floor from what into what?

LozaACCS
Posts: 1504
Joined: Wed Aug 06, 2008 3:55 pm

Re: What value?

Postby LozaACCS » Thu Jun 04, 2015 9:34 pm

As with all cases of this type intention is as important as legislation.
Part or all of the property is being appropriated to a property development business.
The part relating to the main residence will be valued at its development value and will be covered by PPR if it qualifies for PPR relief, lets assume it does.
The remaining part will also be valued at development value and will become trading stock of the property development business, any gain would be subject to CGT providing it was not the original intention to carry out the development, hold over relief may be available under S161 TCGA 1992.
My definition of development value at this stage would be the value including planning permission but before any development in itself.
The proceeds of sale less the stock and development costs would be charged to IT and class 4 NI or corporation tax as appropriate.


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