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TonyTax
TonyTax, Tax Consultant
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Hi (2nd attempt) I bought my farm for £65k 30 years ago

Resolved Question:

Hi

(2nd attempt) I bought my farm for £65k 30 years ago and have lived in a bungalow on site ever since. The local landowner in his adjoining manor house has been trying to buy me out for years and has finally offered £3M, which is probably much more than the market value.

I want to buy a smaller farm or small holding. The problem is, my financial advisors tell me it is impossible to predict in advance the capital gains tax that will arise.

Apparently this tax will be payable on the farm but not the bungalow and the point at issue will be the assessment of their respective values. My question is: Can I obtain some kind of prior understanding with the tax authority as to what my liability will be, even approximately, so that I can make plans for the future?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

You can read about clearances provided by HMRC here and here. None of them will help you I'm afraid. I just gave you the links for clarity.

HMRC will not agree to valuations of property in advance of a transaction taking place simply because they don't see it as their job to provide valuations which are expensive and which may result in no capital transaction taking place. In addition, they take the view that it is up to the taxpayer to go into a transaction with their eyes open and with at least an idea of the tax consequences and to have professional valuations done preferably before the transaction so that a view can be taken on the tax position.

Once the transaction is done, however, the taxpayer can then apply for a post transaction valuation check using a form CG34. HMRC may pass the request to a specialist valuer of their own and if they don't agree with your own valuations, they will suggest their own. If you don't accept the HMRC figures, you are free to use your own in your tax return with a note mentioning the post valuation check. HMRC may enquire into the return and you may have to take your case to a tax tribunal ultimately.

Since you are considering re-investing some or all of the disposal proceeds into new business assets, you may be entitled to business asset rollover relief which you can read about here. This relief effectively defers some or all of a Capital Gains Tax liability on qualifying gains and reinvestment. You may also be entitled to entrepreneurs' relief which you can read about here. This relief limits any CGT charge on qualifying gains to a rate of 10% as opposed to the standard rates of 18% and 28%.

I hope this helps but let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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