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Where Taxpayers and Advisers Meet

PET and APR

Nick_M
Posts:2
Joined:Fri Jun 13, 2014 9:49 am
PET and APR

Postby Nick_M » Fri Jun 13, 2014 10:00 am

Hello
My Uncle owns a farm which will get APR on his death. A small part of this, some 3 acres and a derelict stone farm building, will be left to me in his will. The value of the land is at agricultural value and the building is of negligible value(in fact a liability as it is falling down). The building and land was originally inherited by my uncle at a value then of around £1500 per acre. The land value is currently around £8000 per acre.

I would like to apply for planning on the derelict stone building now and subject to planning, develop the building into a small house. Prior to investing in this idea, I need to ensure I have a legal right to the land and the building and it has been suggested that the land and building is transferred to me now as a Potentially Exempt Transfer. A few questions arise.....

1) Would a PET give me an irrevocable right to the land and building from the date of creation?
2) Would the transfer be subject to CGT even though 100% relief under APR would be available on my Uncles death?
3) Is there a better way to obtain a secure right to develop other than using a PET?
4) If a PET is to be used, how is this formalised? Does it need to be registered anywhere?

Many thanks, Nick

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

Re: PET and APR

Postby LozaACCS » Sat Jun 14, 2014 9:12 am

1. The legal interest in the land is evidenced by the transfer of title, A PET is simply the term used to describe the gift.
2. There would be a chargeable gain for CGT (£6,500 * 3 acres) = 19,500 less the AE £10,900 (if unused) ie £8,600 * 18% or 28% depending on whether you are a basic or higher rate tax payer.
3. The land could be transferred into trust, hold over relief under S260 TCGA 1992 would then be available, however future trust gains will be taxed at 28%, given the amount involved this is probably not worth it.
4 There are no reporting requirements for the PET at the time of the gift, if death occurs within 7 years you would be required to report the failed PET, this can be avoided if the PR's report it.

AvocadoK
Posts:1232
Joined:Wed Aug 06, 2008 3:46 pm
Location:Lancashire

Re: PET and APR

Postby AvocadoK » Sat Jun 14, 2014 6:42 pm

Loza,
I believe hold over relief is also available on a gift to individuals of property qualifying for APR (Schedule 7 of TCGA). So Dad could give to son and hold over gain, without involving any trust.
Regards
AK

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

Re: PET and APR

Postby LozaACCS » Sun Jun 15, 2014 6:14 pm

AK

Yes quite right, apologies for missing that

Nick_M
Posts:2
Joined:Fri Jun 13, 2014 9:49 am

Re: PET and APR

Postby Nick_M » Wed Jun 18, 2014 12:41 pm

Thank you very much for your help, both Loza and Avocado. What steps would we need to take to use the "gift to individuals of property qualifying for APR (Schedule 7 of TCGA)" ?


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