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Sam, Accountant
Category: Tax
Satisfied Customers: 14199
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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My Husband owns a farm and has given free of a charge, a plot

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My Husband owns a farm and has given free of a charge, a plot of land to his son. His son has obtained planning permission with an agricultural tie on the whole of the land including that owned by his Father. Our solicitor thinks that my Husband may be liable for disposal tax on the value of the plot he gave to his son. He gave him the plot before he got planning permission but this has not been done legally with the Land Registry yet.
If my Husband will be liable for disposal tax would it be better if the plot was to be in my name as well as his because then we both have an allowance, I believe. It seems very unfair to charge tax on something that you have not made any money out of.
Thanks for your question - I am Sam and I am one of the Uk tax experts here on Just Answer.
If the title deed remains in your husbands name and will continue to do so then there is no capital gain tax to consider.
If the plan is to transfer the title deed - then I am afraid there will be a capital gain but there are various tax reliefs and hold over reliefs that might apply.
One one way certainly is that any share of this plot that is in your name will NOT give rise to a capital gain as there is no charge that arises between spouses, so maybe a full transfer to your name and a peppercorn rent on your son might be a consideration.
The other considerations I have added in here for you to peruse specifically the gift side of matters
Let me know if you wish me to expand on matters and I would be happy to do so
Customer: replied 2 years ago.
Hi Sam
The idea is to transfer just the plot of land , which now has planning permission for a house, to my step-son.
You are saying that my husband would be liable for capital gains tax on the present value of the plot.
If I became joint owner of this plot, then I believe we would both have an allowance which would bring the cost of the capital gains, down. Is this correct? My step son is keen to actually own the plot of land. Is there any other way around this. I could not get through to the link you sent me.
Customer: replied 2 years ago.
At the time of applying for planning permission we did not realise all of this
Thanks for your response
Yes you are correct in your belief that you would both have an annual exemption allowance of £11,100 (this years allowance) if your husband were to transfer to the plot into your name also - just a word of caution, this being the case then I would recommend that he makes this transfer to you now and then the transfer to your son AFTER 06/04/2015 or HMRC may challenge the half transfer to you as tax avoidance rather then tax efficiency!
I am sorry you could not get onto the link I sen you - let me detail the points I feel might apply to you based, on the fact you have supplied additional information re the plot itself. (I apologise therefore for the length of this response)
This is from the Helpsheet 295 HMRC
What is meant by gifts and similar transactions and how are they treated for the purposes of Capital Gains Tax
If a person transfers an asset to another person for nothing, that is a gift in the strict sense and is a disposal otherwise than by way of a bargain at arm’s length. If you receive something for transferring an asset but the consideration is less than its market value, this is also a disposal otherwise than by way of a bargain at arm’s length. In both cases you will be treated as though you had disposed of the asset for its market value.
There are basically 2 types of relief:
Hold-over Relief, where the chargeable gain is postponed, usually until the transferee disposes of the asset, where a claim is needed
other reliefs, which are due automatically
Hold-over Relief may be claimed for:
gifts of business assets
gifts of unlisted shares in trading companies etc
gifts of agricultural land
gifts which are chargeable transfers for Inheritance Tax purposes
certain types of gifts which are specifically exempted from Inheritance Tax
However your step son will build a house on the plot - so this will NOT qualify for hold over relief as not remaining as used agricultural land and its not a business asset.
Plus the fact that planning permission has been obtained seals the fact this would not qualify for any of the business reliefs available.
So the best way forward is the suggestion you propose and that's a transfer takes place into your name for half of the land - and then the transfer to the step son. Just make sure you adhere to the timings suggested.
Let me know if you require any further assistance
Sam and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Thank you very much for your help. I think we will have to do as you say.