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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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?
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?
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.
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?
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 .
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!]
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.
Even if business use ER could be tricky
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.
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