A client of ours purchased a farm house with some grazing land attached to it in 1997 for £290,000. The total area is 2.86 acres and the house and surrounding lawn cover about 0.75 acre. The farm house including the lawn has been used as main residence since the date of purchase.
The client purchased the farm house with the intention of building a larger house on the grazing land. His planning application was refused. However, because of the shortage of housing in the area he was given planning permission to build minimum 26 and maximum 43 dwellings on the site.
The area of grazing land is landlocked and the only access is through the lawns of the main house. The value of the whole site is now estimated to be in the region of £6m. It can be argued that without the access the development site has no or a nominal value and the whole of the increase in value is therefore attributed to our client’s main residence.
Readers’ views are sought as to any tax implications and suggestion to minimise any potential tax liability.