CGT query on sale of land

CGT query on sale of land

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A intends to sell some land he owns in the future once planning permission has been granted which is likely to trigger a large CGT liability. Beforehand though he is considering transferring the title to the land equally between his children. What is the CGT implication of doing this and the position on eventual sale?

Thank you for any help given

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By jmwaa
10th Nov 2011 12:50

Gift triggers the gain

The client would trigger a gain on transferring the land to his children, based on the current market value. If the transfer is made before the grant of planning permission, market value would depend on the likelihood of obtaining it. 

If the land without planning permission is worth only what it cost him, the children would have a low base cost and be able to use their annual exemptions against the gains, as well as any available lower CGT rate.  If planning permission has already been granted, the uplift would be taxed on the client rather than the children so there would be no benefit.  

If there is already a gain without planning permission, it could be a delicate balancing act for the client to decide when to make the transfer - too early and he risks triggering CGT without any proceeds of sale to pay it from if planning permission is refused - too late and he gains nothing.

 

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By Montrose
10th Nov 2011 13:23

CGT query on sale of land

Double elephant trap.

 1) there be a CGT charge on the gift on current values 

 

2)Such a transaction under what is now ITA s752[Transactions in land ]invites an income tax charge  on the childrens' gain arising from disposal of the land following the obtaining of planning permission. and that charge falls on the client   under ITA s759(6)-[transmitting the opportunity to make a gain]

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By George Attazder
10th Nov 2011 13:46

Hang on...

... how old are the children? and are you giving them the asset absolutely? or are you just transferring the legal interest to them, whilst retaining the beneficial interest yourself?

Assuming it's an absolute transfer, the MV point above applies and it's a PET for IHT.  If they're minors, I'm not sure you can transfer land to them, but if you can, any income, including any that might arise under the transactions in land legislation referred to above will be assessable on you anyway.

If you're retaining the beneficial interest, the land's still yours from a tax point of view.

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