A CGT charge may arise on the disposal of land. In order to calculate the capital gain or loss arising, a valuation is required where:
- the land was owned at 31 March 1982 (in order to determine the ‘base cost’ of the property);
- the disposal was a bargain not at ‘arm’s length’;
- the disposal was to a connected person;
- there is a part disposal of the land and the usual part disposal basis is applied, which requires a valuation of the retained part;or
- there has already been a part disposal and the ‘alternative basis’ of calculation has not been used.
Calculation
- Valuation – professional advice is required.
- ‘Alternative’ basis – the land disposed of is treated as a separate asset – HMRC will accept any ‘reasonable and fair’ method of apportionment of the base cost.
Example:
Where a CGT computation requires a valuation HMRC offer a free valuation check. This service is available only after the disposal has been made but before completion of the Tax Return, so you cannot ask for a check in advance of sale. Should HMRC’s valuation differ from the taxpayer’s valuation, HMRC give alternatives and reasons.
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