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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 have an area of land on which a developer will build

Customer Question

I have an area of land on which a developer will build domestic houses for sale. My agreement with him is that he will pay me for the land out of the proceeds of the sale of houses. From 2016 onwards do I pay CGT at 20 or 28 per cent?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Expert:  TonyTax replied 1 year ago.

Gains on the sale of residential property are subject to CGT at 20% or 28% or a combination of the two rates depending on the level of your income in the tax year of disposal. Gaims made on the the disposal of any other assets which do not qualify for entrepreneurs' relief are subject to CGT at 10% or 20% or a combination of the two rates depending on the level of your income in the tax year of disposal. Take a look here for information on the new CGT rates.

You are selling land so the residential property rates won't apply to you, notwithstanding the fact that you will be paid from the proceeds of house sales. That's assuming that the sale agreement doesn't entitle you to a share of any profits above a certain level in which case you could be treaated as taking part in a property development and charged to income tax and national insurance contributions instead.

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

TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
The land will be transferred (sold) plot by plot. However HMRC will apparently accept any reasonable valuation of each plot of land. Therefore it should be possible to get a valuer to certify that, say, out of the total price paid by the purchaser 20 per cent represents the value of the land. This is a realtime valuation dependent on the market? I am not involved in any construction work or any sales. In fact doing nothing except receiving the proceeds, so that I don't think I can be said to be taking part in property development. Is this right.
Customer: replied 1 year ago.
I should have said "any reasonable basis of valuation for the plots of land".
Expert:  TonyTax replied 1 year ago.

I think that you are correct. You are just being paid for the plots piecemeal because the buyer has to generate a sale in order to pay you so you will pay CGT.