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Title splitting CGT comp for building plot

Have I got this right?

Client sold a former PPR.  CGT arises on part of the period as they moved out 2.5 years prior to sale. 

The house itself has an extension built in the ownership which qualifies as capital works

At the rear is a building plot with planning obtained during the clients ownership for another dwelling. 

The house was sold in 16/17, and the client retains ownership of the plot. The deeds were split only at the point of sale.

In apportioning the purchase price of the house between the land and the house using A/(A+B) for the market values under TCGA 1992, s 42, is it correct that

(i) Ignore the cost of planning to the plot, and add that at the end to the base cost of the land for when  that is sold/developed.

(ii) Ignore the cost of the capital works to the house, and add that as an enhancement cost to the house portion in full

(iii) Apportion works such as splitting the garden as an enhancement cost of the original property, prior to applying the A(A+B) apportionment

Did I actually get that right for once? If so it would bethe first time for a while. 

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12th Jan 2018 16:06

Yes/nope/A/(A+B) applies simply to the total expenditure, subject to the ability to directly apportion any expenditure that is directly attributable to one part or other.

However, see https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg71850p

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12th Jan 2018 16:07

PNL,

I was looking at 42(4) which says:

(4)This section shall not be taken as requiring the apportionment of any expenditure which, on the facts, is wholly attributable to what is disposed of, or wholly attributable to what remains undisposed of.

The planning is attributable to the plot, and the extension to the house, albeit they of course both contribute to the sales price / market value that the A/A+B bit at the end. Hence my mind going round in circles.

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to ireallyshouldknowthisbut
12th Jan 2018 16:28

Yes, I edited to take account of s 42(4).

You want to consider the possibility of the special practice though.

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to Portia Nina Levin
12th Jan 2018 16:57

you sly thing.

So you mean to say I got something right?

I guess it's got to happen once in a while.

I assume by "special practice" we could choose to apportion the lot to the joint purchase value before apportionment?

Would you also agree the home staging costs (they dressed it after they moved out as it wouldn't sell) are not "advertising" as permitted under and incidental costs of sale?

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to ireallyshouldknowthisbut
12th Jan 2018 17:19

No special practice is as per the link in my first post, ie a just and reasonable basis.

I'd be inclined to claim the staging costs, tbh

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