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Do I Need To Report CGT Sale Within 60 Days?

Sale of PPR Residence for £1 million Plus Agricultural Land for £1 million Under Same Sale Contract

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Client is about to sell his PPR residence (plus garden) and surrounding 150 acres agricultural land for £2 million. The house and garden (less than half a hectare in total) is valued at around £1 million and so is the agricultural land.

He has let out the agricultural land for grazing purposes since purchase. He is not a farmer. He asked me whether or not the sale should be done under one or two sale contracts (same purchaser). (What is normal contract practice in this area).

There is no CGT on the main residence sale element, so there would have been no requirement to report this alone within the 60 day limit. However, if he sells the main residence and land for £2 million on the same sale contract, does he have to report the sale within 60 days to pay the CGT on the large agricultural land gain on the basis the house has been sold with (total) (albeit agricultural) land in excess of 0.5 hectare.

Does selling each asset using two separate contracts make any difference. Is using two contracts inadvisable for any other reasons.

Is there also any scope for Stamp Duty Land Tax savings for this transaction anywhere.


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By richard thomas
18th Nov 2021 10:05

I am not in a position to advise you about SDLT or the legal aspects eg how many assets are there? how many contracts should there be? etc except to say that if there are two assets (land registry records might be relevant here) and two contracts there cannot be a problem about 60-day reporting.

On the assumption that there is one asset and one disposal, the question is quite difficult.

The first condition for 60-day reporting is that there is a “residential property gain” (RPG) on land. (This is in paragraph 1(1)(b) Schedule 2 FA 2019).

RPG is defined in Schedule 1B TCGA 1992 as so much of a chargeable gain accruing on a disposal of residential property (RP) as is attributable to that property (paragraph 1(1)).

Paragraph 3(1) tells you what a disposal of RP is, a disposal of an interest in land where the land consists of or includes a dwelling. As a single disposal will include, even though not consisting of, a dwelling, there is here a disposal of RP.

If the disposal is of a main residence and grounds of less than 0.5 hectare (exempt – PRR) and agricultural land (not exempt) then you need to find the amount of the chargeable gain attributable to the RP.

In a case where the whole of the land disposed of consists of RP, that is a simple time apportionment (paragraph 2(1)(a) and (2)).

In a case of “mixed use” of the land paragraph 2(1)(b) applies. There is “mixed use” if on any day in the ownership period the land consists of one or more dwellings (including the garden and grounds – paragraph 5(2)) and other land, as is the case in your example.

Then the relevant faction of the gain is adjusted to take account of the mixed use on a just and reasonable basis. Given the premise of your question is that the two plots are of equal value, then halving the gain is clearly just and reasonable. But that would not, of itself, prevent the gain from triggering a 60-day report as there is a still a chargeable gain on the disposal of RP (as defined).

A decent argument might be however that the only chargeable gain is the gain on the agricultural land (a gain wholly exempt under PRR is not a chargeable gain, only a gain), and that the just and reasonable proportion of the overall chargeable gain attributable to the dwelling is nil, so there is no chargeable gain to report.

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Replying to richard thomas:
By Tax Dragon
18th Nov 2021 13:33

At the risk of sounding glib*, your decent argument is surely the only one that would make sense here. As per the OP, there would not be a chargeable gain but for the non-OMR 'part' of the asset; as per the OP, the OMR is 100%, totally, absolutely, fully exempt; so the entirety of the chargeable gain must be attributable to the non-residential part of the asset (and conversely none of it attributable to the residential part).

Of course (prior to the Budget, which has rectified this nonsense), if just the tiniest bit of the gain attributable to the OMR were not covered by PRR, the whole position changes. Eg if the client bought on Monday, moved in on Tuesday, unpacked on Wednesday, marketed on Thursday, packed up on Friday, moved out on Saturday, sold on Sunday, that might be the end of the common sense position - client was not occupying as a residence at the start or end of the week. (Or it might be an opportunity for common sense to develop further. Though as soon as you cross a boundary you find yourself in a grey area, at best.)

(I use the terms "sense", "nonsense" and now especially "common sense" in deference to Dulls's favourite case, Henke. And clearly someone has seen (some) sense, hence the October changes.)

* I must apologise again for that comment the other day. When I wrote it, my focus was very much on what I saw as the uncharacteristic nature of what I had misconstrued as glibness, not on the glibness itself. But, reading it back now, I can see why you might have been somewhat affronted by the way I expressed myself.

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By The Dullard
18th Nov 2021 10:18

For SDLT purposes non-residential rates apply to the whole (that is the inherent SDLT saving), whether there is one transaction or two (linked) transactions and a single SDLT return can be filed to cover both transactions, if there are two.

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By IslingtonAccountant
18th Nov 2021 12:43

As announced in the recent budget, only the portion of the gain that is the residential property gain is to be reported and paid within 60 days.

So if no CGT arising on the residential property disposal, no need to file.

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