CGT on self build......

[Thehawks]

Hello,
My mothering law and ourselves recently sold our respective houses in order to move to a new location for schooling for our kids. We previously lived next door to each other and decided to look for a building plot to self build two new houses, one for each of us.
Land was difficult to find and we eventually bought a plot which had outline permission for three houses. We bought the plot on a 50/50 basis in all three names. Due to financial constraints we have had to live in rented accommodation and build just one house which we all intend to move into in order to free the rent burden.
We will then begin to build the second property which will take around a year. If we then sell the first house and all move into the second would we be liable for CGT? our intention would then be to build the final property. My mothering law would remain in the second and we would move to the third.
When we set out it looked like there would be no profit from the first house, going by valuations, but it was a means to an end to get what we wanted. As houses prices have risen it looks more likely that there would be a gain from the first house when we sell.
I am in full time employment and am trying to do as much as I can on the build to keep costs down. I’m just wondering what the best course of action would be in terms of any tax liability.

Regards

[pawncob]

I suspect that you'd be liable to income tax, not CGT, as you plan to develop and sell the house.

[wamstax]

I can see as Pawncob says a good chance that HMRC may well argue for (adventure in the nature of trade) trading and income tax on the profit that you will make. Clearly buying a piece of land with permission for 3 houses always says that one would be surplus to requirements and therefore developed for profit. Wouldn't arrange things just for the potential tax savings.

[Thehawks]

Thank you for the replies.
So on the face of it PPR won’t come into it, even though this will be our only home?
I assume that if it’s classed as an income it would be split between all three of us?
I can see the argument for income tax, although if we had bought a single plot, built, moved in and sold after a year, then bought another plot and built that would be considered acceptable. Income tax will leave me paying 40% for a year of hardly seeing the kids grow up. Frustrating!!

[wamstax]

Not necessarily as it is the intention and quality of occupation that would be the considerations for determining if PPR was due. Time would not be the only consideration. For example occupation while the property is advertised for sale would normally weigh against PPR however long that period was. You also may have read in your researches that there have been more main residence challenge cases in recent years which suggests HMRC more inclined to challenge “odd” cases than previously