How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Sam Your Own Question

Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13810
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
16196420
Type Your Tax Question Here...
Sam is online now

Splitting a property for development. Our main residence is

Resolved Question:

Splitting a property for development.
Our main residence is a property consisting of a large house, 2 stone domestic outbuildings and 3.2 Acres of garden. We have planning permission to convert the 2 outbuildings into a new dwelling for our own occupation. We want to split the title giving each dwelling 1.5 acres of garden. This needs to be done asap to allow us to enter into a S106 affordable housing agreement.
If we split the title and then decide not to proceed with the development and sell the property as a whole will CGT relief be available on both titles?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question and asking for me.
Yes, I am afraid there is always going to be capital gain consideration, as the total land in which the main house and the outbuildings sit in exceeds 0.5 hectares (2.47 acres) so whether you proceed with this development not, capital gains will still arise.
So the split of the title, will further establish the capital gain position.
But if you did move from the main house (with its allocated 1.5 acres) which would then ensure a capital gain free position if sold within 18 months of moving out, and the new build become your new main residence, and remained so for the whole period of ownership, then there would be the maximum amount of capital gains mitigated, as this new build/conversions would then be treated as your main residence from the move in date, and there would just be the initial period of ownership to be considered.
Do feel free to ask any follow up questions
Thanks
Sam
Customer: replied 2 years ago.

What I am trying to understand is - if I split the title and then decide not to go ahead with the conversion and sell the the whole plot i.e. both titles to a single buyer - would the total plot still be considered my main residence for the purposes of CGT? Or would the fact that there are 2 titles have any effect?

Expert:  Sam replied 2 years ago.

Hi Thanks for your response

Yes, there will be - as

1) you would have split the title thereby creating an intent to "gain" from this arrangement (even if you then go on to sell as one transaction)

2) Even if the title was NOT split - you are making a sale with land in excess of 0.5 hectares

Even if you had not applied for a separate title, due to the fact the size of the land in which this property lies in, being in excess of 0.5 hectares, HMRC would have looked at whether capital gains should apply. But the application for a split of the title automatically puts this into a position where a consideration to profit from this arrangement has arisen, so HMRC will argue (successfully) that whether this sale is one transaction to one buyer OR 2 transactions to one or two buyers, that a capital gain position will apply.

If you sell the main house and the half grounds, then this sale is going to be exempt from capital gains as long as

1) sold within 18 months of vacating the property

2) That it had been the main residence throughout

If you then move into the redevelopment, then any gain will not arise for consideration until that plot is sold, but it will be recognised, that it had belonged to the whole plot of land, and had been in excess of 0.50 hectares, and capital gains for the period of ownership PRIOR to it having become part of your main residence will need to be established.

And if you do not move into this redevelopment and just sell - then a capital gain position will arise.

Thanks Sam

Customer: replied 2 years ago.

Thanks Sam,

Let me see if I have this clear in the different scenarios!

I need to be sure on all the scenarios as I do not want to compromise myself by splitting the title too early.

Facts:



  • The 3.2 acre plot with house and domestic outbuildings has been our main residence since 2008.

  • The current valuation of the whole plot is LESS than the purchase cost in 2008 plus the cost of improvements made (most of the improvements have been made to the outbuildings I am considering for development), therefore no gain.


Scenario 1 – Sell the whole plot now as a single title –



  • This would have CGT implications as it is over .5 hectare but as there is no gain no CGT would be payable

  • Private Residence Relief would be applicable.


Scenario 2 – Split the title into 2 plots of 1.6 acres but sell both in a single transaction before any development takes place.



  • This would have CGT implications as it is over .5 hectare but as there is no gain no CGT would be payable

  • There would be an intent to gain

  • Would Private Residence Relief be applicable on the whole? – I read somewhere that as soon as I split the title or put a boundary fence up then the land is no longer considered part of the garden and therefore no longer treated as part of my main residence and not eligible for Private Residence Relief. Is this true?


Scenario 3 - Split the title into 2 plots of 1.6 acres, develop the outbuildings and move in, sell the main house within 18 months.



  • The sale of the main house will be exempt from CGT

  • Future sale of the development will require consideration for CGT as it used to belong to a plot in excess of .5 hectares. Capital gains for the period of ownership PRIOR to it becoming part of the main residence will be established. I don’t understand how this would work but don’t believe there would be any gain.


Scenario 4 – Split the title into 2 plots of 1.6 acres and sell both plots separately.



  • This would have CGT implications as the combined plot is over .5 hectare

  • There would be an intent to gain

  • Private Residence Relief would be applicable for the main house

  • CGT would be applicable on any proven gain for the development

  • Presumably valuations would be required for

    • The plot as a whole

    • Each plot individually



Expert:  Sam replied 2 years ago.
Hi
Thanks for your further questions - although this is now becoming far more in depth than your original question suggested - as you just wished to know the one position if you chose not to continue with the development.
I shall, on this occasion delve further into this for you, but note for future reference Just Answer would expect a new listing to be made when work is undertaken over and above the original posting.
Scenario 1 - I agree although there would be no capital gains only by virtue of the fact that a loss arises even though the land is excess of 0.5 hectares.
Private residence relief would be due on the main house and part of the gardens. (to reflect what was reasonable enjoyed as a garden)
Scenario 2 - No, private residence relief would only be due on the split that contained the main house and garden - the other plot would not be due private residence relief, as the split of the title and physical split of the land (whether you had development plans or not) would give rise to a capital gain on this other plot.
But if the position was still one of a loss (as this other half would have the purchase price to deduct from the selling price) then there would be no capital gains but a loss.
Scenario 3 - You are correct - the sale o the main house and the gardens would be capital gain free as your main residence throughout, and then as a long as the sale took place within 18 months of moving out, would remain free of any capital gain consideration.
The other plot, would have a capital gain consideration for - which would be formed by the value when eventually developed and sold, less an amount to reflect the purchase price, less the development costs.
Then any figure left over would be considered for private residence relief for the time you actually lived here, as your main residence, but clearly would have the period of time from initial purchase (in 2008) to the date it was developed and you moved in as a period of time when capital gains would be considered (so in essence the liable period from purchase to development and then not liable period from the time you moved in and the future sale date)
Scenario 4 This would be the same as Scenario 1 - with the exception that the developed plot would fully be liable to capital gains (so sale price, less purchase price, less development costs)
Yes its imperative that you get valuations for the plot as a whole, and the plots should they be sold as individuals and also ask the estate agent to provide valuations to reflect the figure attributable to each plot for 2008 (as you would have the whole figure, as this would have been your purchase price, but its important to establish the individual values as a 2008 valuation so each of the purchase prices can be established)
Let me know if you need any clarification - but it would be appreciated if you could rate/accept the answer, as this ensures that I am credited for my time - this would be much appreciated.
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13810
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
Sam and other Tax Specialists are ready to help you

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.co.uk/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.co.uk/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    2333
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.co.uk/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.co.uk/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    270
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.co.uk/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions