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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I bought a house in 2000 with 6.5 acres. I sold it in 2011

Customer Question

I bought a house in 2000 with 6.5 acres. I sold it in 2011 but the couple only wanted 3 acres. I now have 3.5 acres of field which is worth about £30K.
A company wants to get planning permission for 19 houses on the land then buy it from me at 80% of market value at that time. This could be £1M+.
What is the most Tax efficient way to do this?
Here are my thoughts
I sell the land at current value to my Ltd Company. When the planning permission is gained I sell the land to the development company. I purchase 3-4 houses to rent out within the same tax year. No net gain in capital so no tax to pay? just the tax on the income?
Am I completely wrong? is there a better way?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

Here is the opinion of Acumen Tax Solutions for holdings in excess of 5 hectares:

'You need to be careful about houses with large gardens. Land surrounding a house (and any outbuildings on it) usually qualifies for PPR relief provided it is enclosed and not used for any purpose other than normal domestic use. However, you are usually only allowed half a hectare (about 5,000 square metres including the house itself) for PPR relief, although you can have more provided you can show that it was required for the reasonable enjoyment of the house as a residence having regards ***** ***** size and character. It has been held that staff accommodation can be included as part of your main residence, although you probably wouldn't get away with stables (unless they were within the half-hectare) as keeping horses is unlikely to be seen as necessary for the reasonable enjoyment of a property in this day and age. You certainly wouldn't get away with selling land outside the half-hectare separately as it would then be self-evident that it was not necessary for reasonable enjoyment, unless you could prove that it was sold out of financial necessity.

You also need to be careful about disposing of a property piece-meal. For example, if you sold a house with only part of the garden and then sold the rest of the garden later, the second sale would not qualify for PPR relief as the house is no longer attached.'

So, we come to the conclusion that the sale of the remaining sit will be excluded from Private Residence Relief and any gain made subject to Capital Gains Tax (CGT). If you sell the land to a limited company that constitutes a disposal and attracts a personal CGT assessment (less you annual Exempt Allowance of 11K) on the gain.

Once a limited company has the land companies are not subject to CGT directly, any purchase or sale passes through the profit and loss account for ultimate assessment for Corporation Tax (CT). Depending on the gain made if any by the holding company which will be similarly treated than the development company makes no gain until ultimate sale at some indeterminate future date. There will be CT levied on the income as normal.

I do hope I have helped gthrow some light on your question in a general way, that is.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 3 years ago.
Thank you for your excellent support.