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My mother's old family home and grounds are managed by

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Hi, my mother's old family home and grounds are managed by myself, Alistair Fox, and I live onsite. About 5 years ago the family converted the old house to three flats and I have built a house adjacent on an old swimming pool.
There is a large plot of land, about 1/3rd acre, called the Paddock, which since 1906 had a restrictive covenant. I have got this lifted and have got planning approval for three 4 bed executive homes. The three plots have been valued at £100000 each and the homes valued at £350000. I, acting for my mother, have got an independent developer to agree in principle to buy two plots at £200000 to build for himself and family, and build us the third house, which we could rent out for a while or I could live in for a while. Eventually the developer wants to buy the third house, so he and his family own the new development entirely. Mum thinks she must pay capital gains on the sale of the two plots. I have suggested she use the value of one plot to offset against the construction cost (around £140000)of the third house to avoid this. I would like to avoid any tax on the sale of the third house to the developer by living in it myself first. Please can you advise on any timeframes for how long we would have to wait before selling the third house to the developer, and if any tax on the sale initially of the two plots can avoid capital gains, thanks in advance, Alistair
Submitted: 5 months ago.
Category: Tax
Expert:  bigduckontax replied 5 months ago.

Hello Alistair, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

1/3 acre is below 0.5 hectare, the permitted area. Thus any plot disposal attracts Private Residence Relief (PRR) which relieves Capital Gains Tax (CGT) at 100%. There remains one danger, however. HMRC may regard the transaction as 'trading in land' and subject any profit to Income Tax (IT) as opposed to CGT.

I do hope that you have found my reply of assistance.

bigduckontax, Accountant
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Expert:  bigduckontax replied 5 months ago.

Thank you for your support.

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