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TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 17145
Experience:  International tax
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I have built and sold a bungalow on part of my garden. If I

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I have built and sold a bungalow on part of my garden. If I had sold just the plot of land I understand that I would not have to pay tax on the amount received. Will the value of the plot of land still be exempt now that it is part of the property I have sold?
HMRC advises that whether or not a particular building is within the curtilage of the main house is a matter of fact and degree. The building must be geographically close to the main house and be an integral part of it. The necessary proximity required will vary in each case so it is not possible to set a generally acceptable limit. In Lewis v Rook the main house was an 8 bedroom mansion set in 10.5 acres of land but the Court concluded that a cottage 175 metres from the main house was not within its curtilage. Smaller houses will have a much less extensive curtilage, so the particular facts must be considered in each case.
The land now passes to the cottage or bungalow and would no longer be part of the main home.
Unfortunately the plot would not be exempt.
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Customer: replied 3 years ago.

From this do I take it that the value of the plot cannot be included in the cost of the new build to be set against the sale price for Capital Gains tax. Why should this be different to selling just the plot? If I had bought a plot solely to build a bungalow on then surely this would come under construction costs but I have already bought that plot as part of my property several years ago.

No, you can still use the cost of the plot against the sell price. The fair market value of the plot when you built the cottage would be added to the construction cost for your total cost against sell.