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TonyTax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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A field is owned by four family members, including my husband

Customer Question

A field is owned by four family members, including my husband and myself. It is currently rented out as grazing land for £1,000 p.a.. We are negotiating a sale for the possible development of 13 dwellings, including 5 affordables. The Development Company will apply for planning approval and then pay us for the land, if successful.
All family members own their own homes miles from the field. If the field is sold we are prepared to pay CGT.
The other two family members want to avoid CGT, so are negotiating with the development Company to have a dwelling on the field, instead of a payment for their share of the land. They estimate this will free them from CGT and the dwelling can bring them a rental payment.
Is their assumption correct?
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
Only want to know whether other two family members will be free from paying capital Gains Tax if they have a dwelling for renting out, rather than a straight payment for their share of the land.
Shouldn't this be a question for a specialist Capital Gains Tax Acountant ?
Expert:  TonyTax replied 1 year ago.
Hi.
I'm afraid that the two family members who want to avoid paying CGT won't succeed in doing that by opting for a house on the site instead of cash. They are still selling an asset, albeit they are not receiving cash, but something of value in exchange. If it were that easy to avoid CGT, many more people would do it.
It is possible to rollover gains into another asset but the old and the new assets have to be business assets. Shares can also be swapped for shares in another company in a takeover with no immediate CGT. It won't work in this case. Only where separate pieces of land are jointly owned by the two parties can they each take full ownership of one of the pieces of land alone and defer the gain as you can read in CG73000 to CG73008 starting here:
http://www.hmrc.gov.uk/manuals/cgmanual/cg73000.htm
I hope this clarifies the situation but let me know if you have any further questions.

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