Sale of Land

Sale of Land

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I have a potential client who acquired 650 Acres of land several years ago and built his only residence on the land. He has now decided that he may consider selling a large portion of the remaining land, just keeping his house and 50 acres.

My question is does this fall into CGT or is it exempt as part of his residence.

Any help would be greatly appreciated

Replies (12)

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Portia profile image
By Portia Nina Levin
17th Nov 2014 15:19

I am just guessing

But I expect that even the 50 acres that he has left would be regarded as more than is required for the reasonable enjoyment of his dwelling castle, such that gain on the 600 acres sold is chargeable. Just how big is the dwelling castle?

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Replying to WhichTyler:
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By groundy
17th Nov 2014 15:35

Its a small family home that cost £70k to build. The total cost of the land initially was £120k

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Portia profile image
By Portia Nina Levin
17th Nov 2014 15:37

ROFL

A quick google shows that the smallest county in the UK is Rutland, which is about 384 hectares (900 and some odd acres). The Isle of Wight is about the same size.

Now groundy wants to know if an area 2/3rds the size of the Isle of Wight can be regarded as being required for the reasonable enjoyment of the dwelling house.

I do not suppose that this is Versailles that we are talking about?

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Portia profile image
By Portia Nina Levin
17th Nov 2014 15:40

LOL

I am dreadful at maths. I am using km2 as hectares!

It is still huge though. You need to justify it (or some of it) as being reasonably required for the enjoyment of the dwelling.

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By groundy
17th Nov 2014 15:48

Thank you for your help. Thought it would be chargeable but it is rather an odd one for us and not something I've come across previously.

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Stepurhan
By stepurhan
17th Nov 2014 16:00

Check numbers

650 acres for £120,000 comes out at under £185 per acre. That seems rather on the low side to me, with land prices generally being in the multiple £1,000s per acre from a quick search. Are you sure the size of land and original purchase price are correct?

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By michaelblake
17th Nov 2014 16:41

Typical 31 March 1982 values

Stephuran is right. The value on acquisition looks very low and the acreage is that of a reasonable sized farm in many parts of the UK. Are you sure it was not 65 acres?

If the land was acquired before 31 March 1982 you will need a value at that date - see the

voa site at  

http://www.voa.gov.uk/DVS/propertyMarketReport/1982/agriLandviews.html

for typical values.

When calculating the base cost you may have the choice of using the statutory part disposal method at TCGA 1992 Section 42 or following Statement of Practice D1 to treat the part disposed of as a separate asset depending upon any earlier history of disposals .

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Replying to adamsmith72:
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By groundy
17th Nov 2014 16:54

I have confirmed that it was indeed 650 acres with the client and was after March 1982. He is going to make a considerable gain, hence the initial question. It was my gut feeling that CGT would apply but just wanted to see other peoples thoughts.

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By King_Maker
17th Nov 2014 17:15

I think Portia may have pressed the wrong buttons on her calculator!

Although Rutland and the Isle of Wight are of similar size at ~ 150 sq. miles - this equates to nearer 96,000 acres than 600!

[Edit : sorry, missed your re-think post!]

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By John R
17th Nov 2014 17:33

Entrepreneurs' relief

I have some (albeit limited) experience of negotiating with the District Valuer over the amount of land that is required for the reasonable enjoyment of the property and can therefore be included as part of the private residence. My gut feeling is that the DV will go for just half a hectare as the property is just a small family home so you will need to research this further if the client wants to argue a larger area.

Has the client used the land for business purposes eg seasonal grazing lets? You need to advise him that if the land is used for a qualifying business purposes for the twelve months prior to sale and he ceases all business activities at the same time, he will be entitled to entrepreneurs' reliief.

 

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Replying to chalkysbusiness:
paddle steamer
By DJKL
17th Nov 2014 21:46

Even if business use ER could be tricky

John R wrote:

I have some (albeit limited) experience of negotiating with the District Valuer over the amount of land that is required for the reasonable enjoyment of the property and can therefore be included as part of the private residence. My gut feeling is that the DV will go for just half a hectare as the property is just a small family home so you will need to research this further if the client wants to argue a larger area.

Has the client used the land for business purposes eg seasonal grazing lets? You need to advise him that if the land is used for a qualifying business purposes for the twelve months prior to sale and he ceases all business activities at the same time, he will be entitled to entrepreneurs' reliief.

 

Even if qualifying by use ER could be difficult as client appears not to be selling all the land but is retaining 50 acres. 

 

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By Marion Hayes
17th Nov 2014 21:15

History of land use needed

Was the land tenanted at the point of acquisition? or contaminated?

Was this one of the sell and leaseback arrangements farmers used for a time which has now come to an end.

What has the land actually been used for?

Who got the subsidy/single area payments over the years.

How much is the current value per acre

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