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Where Taxpayers and Advisers Meet

HELP ON PROPERTY CGT

jafarsultani
Posts: 4
Joined: Wed Aug 21, 2019 3:18 pm

HELP ON PROPERTY CGT

Postby jafarsultani » Thu Jan 16, 2020 2:57 pm

Hi,

I've been trying to get some tax advice on some possible CGT tax that my parents maybe liable too, I've phoned and paid for accountants but they've all given generic advice, which is quite frustrating.

Scenario

My brother, parents and I purchased a property that we all residing in, we all owned a equal share of the property.

on 01/10/16 we had the land split and the following year we built a new house on the new piece of land

Now my parents want to remove themselves from the title deeds of the new property, essentially they will gift their share for free which would result in a CGT liability.

Question

The question I have is how do you determine the CGT liability as the new land wasn't purchased so how do you value the land at the point of the land being split.

I have measured the land and come up with the following suggestion, is this a credible approach to take when estimating the base cost of the land

Land A 172 Sqm
Land B 191 Sqm
Total area of initial land 363 Sqm

Property value at date of land split £500,000 (this is a reasonable valuation of the property value on the date)
estimated cost of value of building £200,000 (this is the cost if you where to build a property from scratch)
Land cost £300,000 (assume the remainer would be the value of the land)

land cost per area of land A £142,000
land cost per area of land B £158,000

Capital Gains Tax Calculation

Current Market Value of Second property £450,000
Less Cost of land: £158,000
Less Capital improvements: £180,000 (amount paid to build new house)

Capital gain £112,000
per person £28,000

jafarsultani
Posts: 4
Joined: Wed Aug 21, 2019 3:18 pm

Re: HELP ON PROPERTY CGT

Postby jafarsultani » Thu Jan 16, 2020 3:03 pm

So the question is, is this a reasonable approach to take when determine the base cost of the new Land? any help would be appreciated.

pawncob
Posts: 4420
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: HELP ON PROPERTY CGT

Postby pawncob » Thu Jan 16, 2020 4:58 pm

As the land is within the permitted area of 500sqm the disposal of the land would have been exempt (all PPR relieved), but when did you get planning permission?
With a pinch of salt take what I say, but don't exceed your RDA

jafarsultani
Posts: 4
Joined: Wed Aug 21, 2019 3:18 pm

Re: HELP ON PROPERTY CGT

Postby jafarsultani » Thu Jan 16, 2020 6:10 pm

As the land is within the permitted area of 500sqm the disposal of the land would have been exempt (all PPR relieved), but when did you get planning permission?
the planning permission was approved about two months prior to the land being split, the CGT relates to releasing equity on the new land


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