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Category: Property Law
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I was obliged to sell my freehold of the block (my principal

Customer Question

I was obliged to sell my freehold of the block (my principal residence remains my leasehold flat) to other leaseholders together with a parking area I had created. For capital gains tax purposes can I deduct the value of the parking place from the price I received?
Submitted: 3 years ago.
Category: Property Law
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

I am slightly confused. Was the parking area also disposed of?
Customer: replied 3 years ago.
Thank you. XXXXX bought my flat (my principal residence) on a long lease many years ago, I was also sold the freehold of the block. Some years later I created on the front lawn a parking area ("the hard standing") next to my own driveway. I was entitled to do this under the terms of the deeds. When the other leaseholders compulsorily acquired from me under the enfranchisement rules the freehold, they also became entitled to acquire the hard standing. However that meant the considerable value of the parking facility to me was lost to me because in acquiring what had been the front lawn (a Common Part, which only gave leaseholders the right of pedestrian access to the building) the leaseholders, now the landlords of the block and the land, became entitled to include in their acquisition as common parts the hard standing. I feel therefore that the difference between the cost to me of the freehold in 1997 and the price I received when I sold the new landlords the freehold in 2013 is not the correct way to calculate my capital "gain" because what I sold was a greatly more valuable piece of property, as it contained two parking places in Central London which I had created, than what I had bought as the "freehold" in 1997.
Expert:  bigduckontax replied 3 years ago.
My immediate opinion is that you can include the price you paid for th parking place in the computation of the acquisition price for calculating GCT. It is certainly worth a try. However, this subject is so complex that it might well be adviseable to seek local, professional advice on your taxation position.
Customer: replied 3 years ago.
Dear XXXXX thanks, XXXXX XXXXX answer does not get me much further. The question really asks if HMRC would have grounds for penalising me if I were to deduct the market value of the parking space from what I declare on my tax return. Any suggestion who else e.g. A tax lawyer I could ask?
Expert:  bigduckontax replied 3 years ago.
This is not a matter of penal;ties. You would well be advised to discuss the matter with your tax office well in advance of making a tax return. Not all HMRC staff are ogres! You could cover yourself my stating on yiur return that your gains computation is not final, but estimated and needs consultation.
Customer: replied 3 years ago.
Forgive my persistence but it seems only fair to expect the maximum assistance you can provide. Do you know of anyone at all who has studied the case law in matters of CGT? Is there a textbook or website which I could research? Thanks again
Expert:  bigduckontax replied 3 years ago.
I have already tried to switch this question to legal, but it has already been the subject of a switch to tax and so has been passed to the moderator.
Expert:  bigduckontax replied 3 years ago.
I am consulting with a colleague who is also a personal friend and hope to come back with a fuller answer shortly.
Customer: replied 3 years ago.
Thanks and I shall await your next. It does also occur that although the garden was part of the block freehold it nevertheless also constituted the front garden of my principal private home so is there not an argument it shd be exempt? Look forward to your colleague's opinion
Expert:  bigduckontax replied 3 years ago.
I would agree with your interpretation regarding the garden, assuming its size does not exceed 5000 hectares.
Customer: replied 3 years ago.
Are we still waiting for your colleague's advice or has the moderator switched me to legal?
Expert:  bigduckontax replied 3 years ago.
No, we haven't switched to legal and I still await my colleague's advice. He is very knowledgeable, but highly erratic in his correspondence. I have just rung him and he didn't answer. that's par for the course, but he could be on the line in a few moments!

Do you wish me to opt out, or wait a little longer?
Customer: replied 3 years ago.
No I am grateful and happy to await your friend
Expert:  bigduckontax replied 3 years ago.
Right; I now have contacted my friend who was in local government at a Chartered Surveyor for his whole working life. I was concerned as to whether the flats could be purchased under leasehold reform as this was far from the intention of the original Act which is all but 50 years old now. The reason at the time was the endless Victorian houses built under long leases approaching their 99 years. However, an Act in the 90s extended the principle.

I am advised that this is an incredibly complex subject, the land law alone is a nightmare and the Capital Gains Tax position even more so. I must most earnestly advise you to consult a solicitor experienced in such matters. He, or she, will almost certainly go for counsel's opinion so you are looking at a big bill, but I regret that it can't be helped.

I am so sorry that I could not give you an opinion myself, but at least I have pointed you in the right direction.