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Where Taxpayers and Advisers Meet

Tax relief for planning obligation

Posts: 85
Joined: Wed Aug 06, 2008 3:34 pm

Tax relief for planning obligation

Postby simplytax » Fri Apr 12, 2019 5:18 pm

Assume a company holds land in fixed assets which it then obtains planning consent for residential housing, the land is transferred to trading stock and sold to a house builder.

To obtain planning consent from the Local Authority the company was required to grant a 125 year lease over other land at a peppercorn rent of £100 pa to the Local Authority.

What are the tax implications to the company of providing a lease over this land to the Local Authority?

Normally granting a long leasehold interest would be a part disposal requiring an A/(A+B) apportionment of the cost of the land. However there are no actual proceeds received on the grant of the lease so is there a CGT gain or loss calculation required? Is any deemed value put on the obtaining of the planning consent ?

The original cost of the land is very low . Costs were incurred to clear the land as a bare site as the company originally considered building on that land but that was aborted as the land was required to be given to the Local Authority as planning obligation. Is there a CGT loss ? If so how would that be calculated ?

For the land sold to the housebuilder

Is there a tax deduction for planning obligation ? If the planning obligation was a cash payment then I would expect a trading deduction, but how would you calculate any deduction for the granting of the 125 year lease? The difference in value of the bare land site before the lease and the value after granting the lease?

If the accounting has been to treat the bare land site and site clearance costs as an investment but impaired to nil due to the 125 year lease at a peppercorn rent is there any relief for the site clearance costs ?

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