A client has asked me to see of anyone has experience of HMRC’s view on the partition of land. The situation we have is that there are two farmhouses occupied by two brothers who farm in partnership. All the land is owned jointly. They wish to partition the land so that one brother owns one farmhouse and a plot of land and the other owns the other farmhouse and a plot of land. The partnership will continue to farm the land. The farmhouses are of roughly equal value and the plots of land are of roughly equal value.
Relief is available for a partition of land which doesn’t include a PPR (TCGA 1992 s248A) and also for the exchange of interests in jointly owned PPRs (TCGA 1992 s248E). In this case, the land is all held on a single land registration and the partition would be dealt with by a single contract and conveyance for the land and PPR elements. It would seem that, on the strict reading of s248C TCGA 1992, the inclusion of the PPRs may prevent the exchange being tax neutral.
The land could first be separated into separate parcels and then conveyed separately to achieve the same result, preventing the farmland element being tainted by the excluded land provision of s248C but this would involve legal fees and other expenses which would be prohibitive and would ultimately leave the clients in exactly the same position as a partition by one conveyance. HMRC have been less than forthcoming when asked if having the farmhouses and land in one conveyance and contract is a problem or can it still be treated as splitting two farmhouses/PPRs of equal value and splitting two parcels of farmland of equal value.
I know I am hopeful but does anyone have any experience of how HMRC would view this? It will be expensive in terms of legal costs to have to split everything into separate parcels before the partition occurs – and does seem rather pointless!
Any help much appreciated.