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bigduckontax, Accountant
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My wife has lived on the property for forty years. She was

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My wife has lived on the property for forty years. She was a horse woman, and still maintains two mares, with the same stables, and paddock. Now a developer would like to buy the property. We are somewhat interested, but only if net gain would handle taxation, fund a similar place elsewhere, and leave money for retirement years. Gain on the house and up to a half-hectare presumably would be permitted area, and thus tax free. We understand there would be a possibility of including all or part of the acreage as integral to the permitted area. Any thoughts on the likelihood ? The horse and paddock have not been used for commercial purposes, but only for personal satisfaction and entertainment.

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

'Here is the Gov UK guidance on the subject:

If your garden and grounds do not exceed half a hectare (which is a little

over 1 acre), you are entitled to relief for all of it.'

Thus if this limit is not exceeded then there will be no Capital Gains Tax (CGT) due on the gain.

There is further guidance:

'If your garden and grounds exceed half a hectare, you may not be entitled

to relief for all of it. The area for which you are entitled to relief is called

the permitted area. It consists of the area that is required for the reasonable

enjoyment of your dwelling house as a home. The size and character of your

dwelling house must be taken into account.

If your garden and grounds exceed half a hectare, and you have disposed of

all or part of the garden and grounds, you should:

• enter details of the disposal and gain on pages CG 1 and CG 2, and

• explain in the ‘Any other information’ box, box 37, on page CG 2 of the

Capital gains summary pages why you think, if appropriate, all or part is

exempt from (CGT).

We may ask for further details in these cases and the District Valuer [now the Valuation Office Agency, part of the HMRC empire] will be asked to determine the size and location of the permitted area.'

So you might, in view of the use made of the land over the last 40 years, gain an exemption to CGT anyway.

I do hope that my reply has been of some assistance.

Customer: replied 2 years ago.

Thanks. It was reading the above guidance which led to my question. More specifically, what guidelines are used by the District Valuer in determining "permitted area. Our paddock is of five acres, predicated on the requirement of an acre per horse, and my wife's original holding of five horses. She was honorary chairperson of the local horse association at the time. Guidance re what can be included in a permitted area would be helpful in what otherwise is a rather grey area.

Appreciate your comment

That is exactly what it is in your case, a grey area. You will notice that the Gov UK advice is not exact in situations when the pernitted area is exceeded. I would suggest that in this case, where the land has been used for the same purpose for such a considerable time, that the Valuation Office Agency will exercise discression and allow the whole plot free of CGT. In any event the proportion charged on the excess area would be small and your wife does have an Annual Exempt Amount of 11.1K to offset the gain which, in any event, is from an April 1982 valuation. 1982 is when the clock stopped so to speak on the old index linked system, indexation being compensated for by a reduction in the rate of CGT to 18% or 28% or a combination of the two ratyes depending on your wife's income including the gain in the tax year of sale.
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Customer: replied 2 years ago.

Your comment is very encouraging, especially should the Valuation O ffice view the situation as it exist today, with house and garden opening onto mowed acreage, with the two horses lending their rural ambiance to the scene. Anyway one can arrange for an inspection by the Valuation Office before a developer comes on the scene?

You could certainly ask the Valuation Office Agency for their opinion. I have always found their staff exceeding professional and helpful whenever I have had to deal with that Agency.

Thank you for your excellent support.

Customer: replied 2 years ago.

Thanks, ***** ***** your comments.


Delighted to have been of assistance. The Valuation Office Agency has an extensive staff of Chartered Surveyors which is reflected in their efficiency.