New Build in PPR garden - sell land to related Ltd Co.

[landlord1234]

Bob is a builder / developer and is sole director of 'Robert Ltd.' which develops property.

Bob lives in and owns a property ( his PPR) which has a large garden which could potentially be a building plot, but has no planning permission.

Assuming Bob gets permission for a new build in his garden,

What would Bob's tax liabilities be in the following scenarios

1) Bob sells the land to Robert Ltd. (Robert Ltd's tax position is understood)

2) Bob builds the property himself without involving Robert Ltd.

3) Bob pays Robert Ltd to build the house.

4) Bob pays Fred Ltd ( unrelated company) to build the house

Thanks in advance for any comments.

[section 44]

1. Disposal at market value and any gain exempt from CGT.

2. Bob would incur VAT at 20% on certain goods and services that he procures. Some of this VAT would potentially be recoverable.

3 and 4. Bod might incur VAT on certain goods and services.

[DCF]

What is the size of the garden?

[landlord1234]

Sorry, I should have made that clear. It is relatively small, enough to squeeze a 3 bed detached property, and well below 0.5 hectare.

[DCF]

There should be no CGT on the disposal of the land then. However, he could build it personally and consider living there as his PPR. It could then be tax-free on a future sale providing it became a residence and he made the election to HMRC.

[LozaACCS]

I would say

1 A gain arises on the sale to R Ltd based on MV (connected persons), fully covered by PPR relief.
2 A gain arises on the transfer to the property development business, again fully covered by PPR, the subsequent profit is chargeable to IT.
3 Same as 2, R Ltd pays CT on its profits.
4 Same as 3, Fred Ltd pays CT on its profits.

The anti avoidance rules at S755 ITA 2007 are ever present here, the motive test at S756 is clearly in point, however the main residence relief at S767 should provide a safe harbor.
In this context I would not entirely agree with DCF, an argument would (in my opinion) need to be upheld that Bob built a house within the grounds of his existing main residence for no other purpose then to make it his main residence, I think the motive test becomes relevant here.

[Ian McTernan CTA]

I think the complication is that Bob is a property builder/developer by trade. HMRC may launch an enquiry into the disposal of the plot from the grounds and look at the history of the property to determine Bob's motives in buying the property in the first place, eg how long Bob has owned the property and what other claims to PPR he may have submitted in the past, with a view to disallowing the claim and possibly also treating the proceeds as part of his activities as a developer.

Possible minefield and you need to get your facts very clear due to the nature of his business.