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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have a buyer house which is on a 4 acre site, the

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I have a buyer for my house which is on a 4 acre site, the buyer wants to split it into halves, 3 acres are on one section, 1 acres is with the house, I am worried about what capital gains he will force me into if I sell it like that would you treat it as 2 sections or would you treat it as one section.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

I would be inclined to resist splitting the site into two parts and it would be interesting to know why the potential buyer wants to do that. Having said that, given that the site covers more than half a hectare or about 1.23 acres, you may well have to pay Capital Gains Tax on the gain related to the land in excess of 1.23 acres unless you can convince HMRC that the size and character of the house requires such a large piece of land in order for it to be reasonably enjoyed. This is a somewhat subjective concept but imagine Buckingham Palace with a garden 150 feet long instead of the 42 acres the grounds cover. It wouldn't be the same.

Take a look at the notes in HS283 here, in particular the sections headed "Garden or grounds" and Permitted area". Theis is also some commentary on the size of grounds here and here. The HMRC manual instructions to staff dealing with a large property disposal are here. Restrictions on the exempt gain may also apply if some of the land is fenced off from the house and garden.

You can sell of a piece of your garden to a property developer, for instance, as many people have in recent years and not pay Capital Gains Tax on the basis that you have made a part disposal of your principle private residence which is exempt from tax so long as that happens before the sale of the house itself and the total plot size is within permitted limits or a greater limit if the size of the house justifies it.

It would be interesting to know if the person you bought the property from paid Capital Gains Tax when they sold it to you, though without asking them, that may be impossible to find out. You ought to consult a land agent and an accountant or tax adviser to assess the potential split of the gain between what might be taxable and non-taxable parts given that HMRC may get the District Valuer involved.

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

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