CGT on part disposal of inherited family home

CGT on part disposal of inherited family home

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Clients are brother and sister who both have their own PPR.

Both parents are now deceased and the family home where the parents lived has been left in the will 50:50 to brother and sister. Valuation approximately £400,000.

The site has a large garden with access so they are looking to sell off half the garden to developers and then sell or let the house.

Because they have their own family properties I am assuming that as a pure investment property, any sale or part sale will simply be subject to normal capital gains?

Assuming so, I believe that they are effectively acquiring the property at a base cost that is probate value so £400,000. If they sold half the garden for say £100,000 what would the apportioned cost of the land sold be? Assume that the land sold equated to half the area of the site as a whole.

As another point, both brother and sister lived in the property from birth to leaving home, would this be relevant to bringing into play a PPR claim?

In terms of tax planning, if one of them moved into the house and then the sale of the land went through and then the sale of the property would it be correct that only that person would be able to claim PPR reliefs based on their half gains?

There's a few questions here but am I on the right track?

Thank you

   

Replies (4)

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By johngroganjga
09th Mar 2016 14:45

The apportionment is based on values not square footage.

You need to ascertain or estimate the value of the house plus the part of the garden being retained. The value of the part disposed of will be what it sells for. You then apportion the costs on a A/A+B basis.

The owners's past occupation doesn't come into it.

Only the owner living in the property would be entitled to PPR relief - but only if the occupation was of sufficient quality, which from what you say it almost certainly will not be. 

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By geoffmw1
09th Mar 2016 15:05

Occupation prior to ownership

does not count for a PPR Claim.

 

John's reply tmplies that land and buildings on them increase in value at the same rate.

I think you may need to establish how much the land might have been worth at date of death

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Replying to bibbtybobbityboo:
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By Portia Nina Levin
09th Mar 2016 15:07

No

geoffmw1 wrote:

John's reply tmplies that land and buildings on them increase in value at the same rate.

I think you may need to establish how much the land might have been worth at date of death

John's reply details the calculation that is set out in law.

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By Montrose
09th Mar 2016 16:35

Was value when acquired £400,000?

If development value existed at date of parents' death, then that should be reflected in acquisition cost.

 

Be careful what you wish for- that could decrease CGT [at 28%] but increase IHT on death at 40%.

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