My sister and I were given a piece of agricultural land by our mother in 2008.
We sold this land in May 2010 to the owner of a business adjacent to the land for £70K. Now that I am doing my tax return I have a question about the market value of the land.
As agricultural land I believe it was only worth about £5K making our capital gain about £65 (excluding our selling costs)
BUT the person who we sold the land to, had a surveyor come in to value the land prior to him making an initial offer to buy the land. Our land contained a partial right of way onto his land.
Quote
"We are of the opinion that the market value of the freehold interest with vacant possession of the land adjoining [your property], taking account of the fact that you would be a special purchaser as the owner of [adjoining property], is in the region of £35,000"
Can I use this as the market value?
If so, how do I tell HMRC where I got the valuation from? I only have this above quote in an email from the vendor.
Thanks!
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Replies (5)
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Mother
I am just wondering what your mother put on her tax return when she gave the land to you?
If the land was worth £35,000 when she gave it to you in 2008 then she will no doubt have paid CGT at the time based on that value and you can use the value shown on her tax return as your base cost.
If, on the other hand, she did not pay CGT at the time based on that value then you cannot use it as your base cost.
Simples!
David
David
I know my mother's accountant used the market agricultural value of the land on her tax return, ie about £5k so she didn't pay any CGT.
So this means I can only use the £5K value myself? I thought this was probably the case, but I hoped I was wrong!
Thanks
So, do I have to give HMRC details of where I get the £5K market value from, as it is an estimated value?
Market value
I think that, in any event, the valuer is not saying the market value of the land is £35,000. He is saying it would be worth £35,000 to the person who owns the adjoining land - which is not the same thing at all.
If you know that your mother put a value of £5,000 on the land in 2008 then why not say exactly that on your tax return?
David
So why did purchaser pay you £70k?
So if agricultural value was £5k, to adjacent owner marriage value was £35k per his surveyor then why did he pay you twice as much at £70K?
The question is only out of my interest, for it looks as though HMRC will want, between you and your mother, to be paid CGT on the gain between her base cost and your sales proceeds. You could have your mother's accountant run the numbers if the value of her gift was revised to say £25k so that you and your sister would have a gross gain of £50k which after annual exempt amount might mean only a 18% marginal tax rate for each of you rather than 28%; but against that your mother might have CGT (though taper relief in 2008?) and penalties to pay and there maybe an IHT aspect of increasing value of failed PET on gifted land which would not qualify for APR.