Barn conversion & CGT

Barn conversion & CGT

Didn't find your answer?

New client & wife bought a cottage with outbuildings including a barn in March 2002. The client applied to convert the barn to a domestic dwelling in June 2002 and consent was granted in April 2003. The conversion was completed in October 2003.

The cottage was occupied by my client & wife from March 2002 to October 2003. Client & wife then moved into the converted barn.

Work on refurbishing the cottage commenced in October 2003 and is virtually complete.

Client & wife intends to let the property.

The client & his wife have so far not elected for either property to be treated as their main residence.

The original cottage & outbuildings were purchased for circa £250K.
Mortgage outsatnding = £250K

The cottage and barn have been valued at £400K each.

Husband 40% tax payer
Wife basic rate tax payer

Client & wife are happy to live in either residence.

Questions:

What are the CGT implications if they wish to sell either property? Can they be mitigated in anyway?

Would any gain be attributable to the barn conversion costs only? The balance covered by PPR?

Would the sale of the barn be taxable under Sch D Case VI re s776ICTA 1988?

Can PPR apply to both properties?

Have they still got time to make the election for main residence relief?

If the cottage or barn is let are there any ways of minimising the Sch A tax liability? e.g. apportion the mortgage interest between barn and cottage?

If they retained both properties and let one,what simple IHT planning could be undertaken? Creation of a Discretionary trust in favour of their children and surviving spouse?

John Monaghan

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.