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Sam
Sam, Accountant
Category: Tax
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I bought a house with a commercial yard in 1999. I used the

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I bought a house with a commercial yard in 1999. I used the yard for my business till 2013. I obtained planning for a two bed house to be built in the yard. I changed the use of the yard with the council in 2013 and built the house. I sectioned off the original house and sold it in 2013 September. The house in the yard was sold in 2014 December.
The house in 1999 was £ 100,000 The Yard £ 40,000. I had the original house for 15 years.
The market value of the house in 2013 was £ 80-100,000 with planning. I spent £120,000 building the new house. What capital gains tax is due. House sold for £ 250,000
Submitted: 10 months ago.
Category: Tax
Expert:  Sam replied 10 months ago.
Hi
Thanks for your question
I am Sam and I am one of the UK tax experts
Could you advise
1) Did you ever move into the property built in the yard which was subsequently sold for £250,000
20 Had the property that was initially the main residence (and sold in Sept 2013) always your home right up until the sale date
3)How have you determined that the value of the yard was £40000 in 1999. Was it a separate purchase from the house
4) Did you pay capital gains on the yard when you ceased using it for business - and paid this through the final accounts of the business - as the yard was an asset of your business. Was the business sole trader, partnership OR limited company and its value in 2013.
5) Were both houses and the yard (before the house was built) in just your sole name
Thanks
Sam
Customer: replied 10 months ago.
Thanks Sam Answers as follows.
1/ Yes my family did 2 / Yes 3/ The house and yard were £140,000 At the same time the house next door an identical build sold for £ 100,000.
4 / No it was in my name from 1999 when bought. The accounts stated I received a rent for the yard. Valued 2013 after planning for house at £ 80- 100000. 5 / In 1999 when I bought the house my wife had a second charge drawn up giving her all the money from the property house and yard, so when sold she received all the money from both properties.
Customer: replied 10 months ago.
Sorry Sam, answer to 1 no we never moved into the property in the yard.
Expert:  Sam replied 10 months ago.
Hi
Thanks for your response
What does that mean - the accounts stated that you received a rent for the yard?
And expand on the situation re the second charge that you wife had drawn up to get all the money from the sale of the yard and newly built property?
Thanks
Sam
Customer: replied 10 months ago.
The accounts for the business I had in the yard.
The charge covered the money my wife had put in from her own money
Expert:  Sam replied 10 months ago.
Hi
Why did you collect rent - it was your yard - used in the business how did any rent come into play?
I need you to expand what money your wife put into the yard and house build - did you sell the yard to her - or transfer into her name so she could legally build on it - did she lend you the money - I need more information so I can give you the correct information as this seems to have got very complicated !
So perhaps talk me through the steps
Who bought what and when -
How you transferred the yard from the business to you and when
What involvement your wife had and did you transfer the yard to her name
Who held the deeds to the new build
How much she lent to the project and how much did she get back as this may be her capital gains not yours
Would it be easier for you to ring - I can offer this as an additional service (I am in the UK - in Kent) but this will incur an additional charge ??
Let me know what you think as this may prove to be quicker as you are not giving me enough meat to your answers, to establish the facts
Thanks
Sam
Customer: replied 10 months ago.
The house and yard purchased in my name 1999. The charge was added at the point of purchase. It remained in my name till both sold I received no money from either sale. I want to know if the land value can be added to the build cost of the new build total £200 to £220000 leaving us £30-50000 to pay capital gains tax on
Expert:  Sam replied 10 months ago.
Hi
Thanks for your response
I cannot answer this as you refuse to answer my questions - enabling me to give you the legal answer -
It makes no odds whether you received any money - I cannot advise whether you bring the land into play as
1) You used it for business so it was a business asset until 2013 and you have not advised whether the capital gain position was dealt with at this time
2) You then advise your wife paid for the build but yet she is not mentioned on the deeds for sale -
This all seems very complex and I am not willing to guess the answer
You can either
1) Ask for a refund as you are unwilling to help me help you OR
2) Provide the details I ask for so I can provide you with an accurate answer.
Thanks
Sam
Customer: replied 10 months ago.
Hi Sam
The land was in my personal name from 1999-2014.when sold with a new house on it . It was never a business asset.
My wife was not on the deeds as the Mortgage was in my name. In 2012 it was paid off,
Expert:  Sam replied 10 months ago.
Hi
But it was a business asset as you advised that the yard was used for the business until 2013 -
And you mention something about rent being claimed in the accounts
Who charged the rent and why - if the yard was yours all along?
So I still cannot see how you can take the value of the yard into account when its not clear whether capital gains was paid to change this from a business use asset to then your personal land.
Then yes you will have a capital gain on the sale of the new build - how much did your wife lend you - this might be relevant
Thanks
Sam
Customer: replied 10 months ago.
My wife put £ 60,000 into the house. The deposit of £35000 and she cleared the mortgage with a payment of £ 28000 In 2012
Customer: replied 10 months ago.
The yard was built in 1875 and was used as a coach building business right up to when we bought it. No rates were paid on it. It was not sold as a separate entity to the house.
Expert:  Sam replied 10 months ago.
Hi
Then its not allowable and cannot be taken into account as this clearly is a private arrangement with no interest charges arising - and as the true build costs are considered - then its just a question of whether the yard can be considered and in the absence of way to find a positive - then its likely no as I doubt the yard gained in value much between 2013 and 2014 (when house was built and sold) and the yards capital gain position actually arose in 2013 when the business ceased as it was used solely for business and as this clearly did not occur then you cannot bring the value of the yard into play. (although it should be)
It WAS a separate entity as you only used it for business during its whole period of ownership so its a business asset - not an additional element of the house so you should have paid capital gains on it when the business ceased to put it back into personal use. And you advise you charged rent for it - so you cannot have it used for business and then not when it suits you - its either/or and you are not enabling me to set you on the right path with how to take this forward.
So I am sure you can appreciate n the absence of you being willing to answer my questions with the information I am actually asking for - you cannot have it as an expense on the new build when you did not exit its value from the business (for which it was used for throughout until to business ceased)
Thanks
Sam
Customer: replied 10 months ago.
The only issue is the amount of capital gains on the new build house. After selling the house we had lived in for 15 years in 2013, we moved. We then started to build the new house in the yard sold 2014.
The issue is whether we can offset the build cost and the full land value against the sale price or do the revenue have a formula they use
Expert:  Sam replied 10 months ago.
Hi
You think its the only issue but by law it is NOT and I cannot ignore or skip past that law, which I am sure you can appreciate or what sort of "expert" would that make me!
The yard has been used for business so was not "yours" to ignore when the business ceased to then just allow as viable to build a house on - there SHOULD have been a legal acceptance that it was no longer business so HAD to have a tax point of change of use which in itself created a capital gain position.
I really am not sure why are you not understanding this vital element.
And your ignoring this factor then does NOT allow you to introduce ANY value of the yard into the costs of the sale price of the new build.
So in answer to your final sentence which you ask
The issue is whether we can offset the build cost and the full land value against the sale price or do the revenue have a formula they use
I repeat again NO you cannot have the full land value for the reasons stated several times now. YOu cannot ignore the law and what is required of you and then evade tax and then expect to have the value of the land against this build - you cannot have it both ways.
So you can have the build costs and any legal fees to build, and legal estate agent fees to sell as there are allowable costs to deduct against the sale price
Thanks
Sam

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