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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I sold my main private residence in march 2015, which i

Resolved Question:

i sold my main private residence in march 2015, which i understand qualifies for PFR; however the house was in two plots a) the main house and gardens (c3acres) and b) attached land (c7acres). The same buyer bought both but completed on the land a few weeks before the house. Do I have to pay cgt on the land sale?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

Hi.

When you sell your main home, the total permitted area is half a hectare or about 1.23 acres. That is unless the house is of a size and stature that it needs a larger piece of land for "its reasonable enjoyment". You say the main house and gardens covered 3 acres so you may have an issue with HMRC on that alone.

As for the 7 acres, if this is separate from the main house and gardens, ie separated by a fence or wall, then HMRC may claim that it is not part of the main house and gardens and seek to tax the gain. The fact that the two disposals were carried out as separate transactions doesn't help and the fact that the buyer was the same person exacerbates the problem further. Certainly, any land used for business purposes will not help. It would not necessarily be a problem that the land was sold first if HMRC accepted that it was an integral part of the whole plot.

Take a look here for more information on the main residence and CGT and here for a more detailed analysis of the sale of land around a house.

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

Customer: replied 1 year ago.
i purchased the land and gardens as one plot in 2004, the house is substantial - 7 bedroom georgian house with tennis court and pool etc, but the land part is separated by fencing and gates so that it could be used as a paddock. The land adjoins the river which may be helpful because we used the river for recreational puposes (eg boating/ fishing) There was no business use to any part of the property. But I appreciate that selling as 2 disposals doesnt help - hence my question! I understand that it may not be easy to claim that the land was integral - given that i sold it before selling the house - so what should I do? It sounds like a must decalre this on my tax return - but would benefit from expert help in completing this section of my return? I guess there must be ways of completing the form to give the best chance of success?
Expert:  TonyTax replied 1 year ago.

Leave this with me while I draft a response.

Expert:  TonyTax replied 1 year ago.

In recent years, many people have sold off a piece of their garden and the gain has been exempt from CGT because the total plot are was no more than half a hectare and they have simply sold part of their main residence so selling the land before the house is not necessarily critical. However, if you read the notes behind the second link I gave you in my previous post, HMRC may ask you why you are claiming that the land was an integral part of your home having sold it. The fact that you used the river helps. You could argue that the sales of the house and the land were only separated by a few weeks, not years and the intention was to complete the process on the same day.

Given what you have told me I'd say that you have a good chance of getting CGT exemption for both gains but I haven't seen the site and how it fits together. If you get into an argument with HMRC, a land agent with long experience of such matters combined with a tax expert who can use case law would help.

As far as calculating the gains is concerned that should be fairly easy. You need to separate the purchase costs and subsequent improvement costs between the house and gardens and the land. That will allow you to compute the gains made on each sale. You would then use the code PRR from page CGN3 of the capital gains summary notes here to claim relief from CGT for the two gains. You will need to either use the worksheet in the gains section of the online return or produce your own detailed calculation which can be converted into a PDF to be attached to the return if you are submitting it electronically. Your notes will need to explain why the whole of each gain should be exempt from CGT. The date of exchange of contracts is normally the tax point for a property sale, not the completion date.

TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
thank you for your help.
Expert:  TonyTax replied 1 year ago.

Thanks and good luck.