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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I am to inherit agricultural land of approx. 24 acres, currently

Customer Question

I am to inherit agricultural land of approx. 24 acres, currently valued approx. £240,000. It is hoped this may be of use as building land in the future. I understand inheritance tax won't apply on this value. If I then sell it on for building land, do I become liable for capital gains tax or is there anything else I could be caught with; particularly if I sell quite soon after inheriting?
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.

Joshua : Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.
Joshua : May I ask if the land will actually be used for farming purposes initially please?
Customer:

Yes.

Joshua : Thanks. On that basis as you say the land should qualify for agricultural property relief and not count to the value of your estate for inheritance tax purposes and this would include any farmhouse on the land and cottages etc provided they are actually used in connection with farming of the land. There is a qualification period of two years which you need to own the land for before the relief will apply.
Joshua : The relief will cease to apply if the land acquires planning permission for change of use for building land not will it apply normally if it is subject to a binding contract for sale prior to your death.
Joshua : If you were to sell the land on as building land then there would be a CGT gain to pay on the increase in value of the land. You can offset CGT in these circumstance by placing the land in joint names for example if you are married or have a partner so as to share the gain between you.
Joshua : You can also deduct any professional fees you incur in terms of seeking permission to develop the land and in terms of acquisition and disposal costs.
Joshua : If the land were sold as agricultural land and you then bought another business asset such as more land you could apply for business asset roll over relief to defer and gain until a later date.
Customer:

If the land was placed in my Brother & both our partners names too, to share the gain between us, how does that work and how does it affect CGT?

Joshua : One very useful relief if selling the land, particularly if you are successful in obtaining planning permission is to seek to apply entrepreneurs relief (ER). This is possible if the deal is structured correctly. ER is a very valuable relief as it lowers any CGT to 10%. In essence in order to apply for ER you need to sell the development land as an integral part of the sale of the business as a whole as opposed to separately. An accountant can help you structure the deal correctly if this is a future reality but it is something to be aware of at an early stage if you think it is a possibility in the future as it can save a lot of tax potentially.
Joshua : Each person has at present a £10,900 allowance each (it goes up a little every year). If there are more than one owner it means you can use each persons allowance - so if you have four owners you have 4 x £10,900 to deduct from the gain before you start calculating the tax due.
Joshua : Is there anything above I can clarify for you any further?
Customer:

No, thanks very much for your help, Joshua.

Joshua : A pleasure. Is there anything above I can clarify for you any further?
Joshua : If I can assist any further as the situation develops please do no hesitate to let me know.
Joshua : If you have no further questions for now I should be very grateful if you would kindly take a moment to rate my service to you today. Your feedback is important to me. If there is anything else I can help with though please reply back to me though.
Customer:

I will do Joshua, thanks again. Janis

Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
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