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Where Taxpayers and Advisers Meet

Differing advice on CGT on sale of garden.

nickindevon@aol.com
Posts: 4
Joined: Wed Aug 06, 2008 3:11 pm

Differing advice on CGT on sale of garden.

Postby nickindevon@aol.com » Wed Nov 21, 2018 12:54 pm

Hi All,

Id really appreciate your help to point me in the right direction, Ive already paid for advice from two accounts and had a Land surveyor plot sales company out but the advice I have received is conflicting. Im happy to donate to a nominated charity for advice given :).

Situation:

in 2012 My wife and I bought our house. It is set in .3 of an acre it has been our sole dwelling and we wish to reside here (hopefully) forever.

In 2013 we bought the neighbouring property also situated in about .3 acre in joint names
We Let the property next door to a tenant on an AST until June 2016.

In June 2016 my elderly father moved in (to keep things tidy this was also on an AST) We started to use part of the rear garden of next door as ours ( it was too much for dad to maintain and we were caring for him so back and forth.)
In approx June 2017 we hived off part of next doors garden by erecting a fence ( about .15 acre) as dad was leaving gates open and our dog was getting out. The kids have used it as a football pitch etc, Im getting bored of mowing it!!)

Sadly dad isn't very well (%%%%%% parkinson's!) and has had to go into a home so we now are looking to sell the house next door.
I have had Estate agents out to value it and the advice they are giving me is that there is easily enough room for a new dwelling on the part of garden we have hived off.
I have had a Land surveyor out who has told me that as the land is being used as our garden if it were sold it would be exempt of CGT as it is now part of our garden without doing anything title wise.
I have had one accountant, (who I paid but is a friend) tell me that I would need to legally transfer this parcel of land onto my house deeds in order to be belt and braces and claim the relief.
My accountant friend isn't a CGT specialist so I have been to a local very large accountancy practice for advice and they have said that the PPR relief would not be available as we put the fence up in 2017 even though we have been using the the garden since 2016. They suggest I transfer the garden into a new Ltd company prior to going for planning to mitigate tax if we sell the building plot.

Hence I am now very confused.

Given the figures involved and potential tax implications I obviously want to make sure I get my ducks in a row prior to going for planning permission. Im not adverse to paying tax I just don't want any massive shock payments if I can help it.

Figures involved

May 2012 £500,000 bought our house
June 2013 £335,000 bought next door.

Garden value without planning £25,000
Garden value with planning approx £250,000

Next door value with garden £425,000
Next door value without garden £400,000

Many thanks in advance


Nick

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

Re: Differing advice on CGT on sale of garden.

Postby maths » Wed Nov 21, 2018 8:44 pm

The garden does not qualify for exemption from CGT on sale. Even though you may have enclosed it by way of fencing so that it is used as part of the garden of the house in which you live you do not own an interest in it which is the same interest owned in your home.

On a sale of the previously rented property including the garden now fenced off would not be exempt from CGT as it has never been your main/sole residence.

Makes sense to extend legal title on your own home to extend to the garden now fenced off which would then be owned and enjoyed with the home.

However, if such a transfer is effected and planning is applied soon after with a view to sale it is highly likely that any gain on sale would not be exempt but may be subject to income tax.

nickindevon@aol.com
Posts: 4
Joined: Wed Aug 06, 2008 3:11 pm

Re: Differing advice on CGT on sale of garden.

Postby nickindevon@aol.com » Wed Nov 21, 2018 9:30 pm

Thanks Maths for your quick response.

Thats just the straight down the line answer i needed.
Thank goodness I didn't take the agents or friends advice. It just didn't feel right.

If I take it further I will through the large local accountancy firm.

Please can you suggest a charity I can put a donation into?

Many thanks


Nick

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

Re: Differing advice on CGT on sale of garden.

Postby maths » Wed Nov 21, 2018 9:53 pm

Nick

May I suggest that you wait to see if any other respondent disagrees with my view.

If no one disagrees and you would like to make a donation that would be very kind.

Either any cancer charity or Alzheimer’s charity

Thank you.

wamstax
Posts: 1869
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Differing advice on CGT on sale of garden.

Postby wamstax » Wed Nov 21, 2018 10:51 pm

Hi Maths
I wouldn’t go as far as to say the gain would be liable to income tax if all that was done was apply for planning permission. However agree that MRR impossible if all the facts related to HMRC and HMRC looking to take up CGT and MRR cases of recent times
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website


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