CGT on gifted property with planning permission

[cwr]

If a property has planning permission granted for a replacement dwelling, what is the situation re capital gains tax if the property (which is a the sole PRR of it's owner) is gifted to a close family member?

I understand that without the planning permission the situation is relatively simple, but with valid planning permission does this change the situation at all?

 

[stephen margerison]

Having same problem, accountant says I must transfer at initial cost price, BEFORE planning is granted, problem with HAVING planning, I revenue can ask for a CURRENT valuation, ( also there is land tax to pay) although if the site had a previous building on it, so long as you don't make new building too much bigger you could be alright (uk not Scotland)

[Temp]

Gifts of land are taxed as if you sold it at market value. However if it's part of the owners PPR then they should have no CGT to pay. 

 

It used to matter if the site had been "developed" by getting planning permission but this changed some years ago and it does not matter now provided certain rules are met. The plot must be under 1.25 acres and I think it must be garden not say an attached paddock or similar..

 

See.. "The Tax Rules Explained" down here..

https://www.homebuilding.co.uk/how-to-build-a-new-home-on-a-garden-plot/

 

There will be stamp duty etc to pay.

 

There could be IHT if the person gifting the land dies within 7 years. I've no idea how the new £1m allowance applies in this case. I think you have to be a close relative like a son/daughter not a grandson/daughter?

Edited October 3, 2019 by Temp

[Temp]

On 01/10/2019 at 18:14, stephen margerison said:

Having same problem, accountant says I must transfer at initial cost price, BEFORE planning is granted, problem with HAVING planning, I revenue can ask for a CURRENT valuation, ( also there is land tax to pay) although if the site had a previous building on it, so long as you don't make new building too much bigger you could be alright (uk not Scotland)

 

Would be interesting to know more details of your situation. Presumably the land isn't part of a PPR?

[cwr]

Hi Temp.

 

Are there official rules or laws that can be looked up to verify this:

 

Quote

It used to matter if the site had been "developed" by getting planning permission but this changed some years ago and it does not matter now provided certain rules are met.

 

For example, on a government website etc, do you or anyone know where these 'certain rules' can be found?

[Temp]

Try...

 

https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2019

 

How the relief works

You would normally have to pay Capital Gains Tax on any gain you make if you dispose of:

• a dwelling house (which can include a house, flat, houseboat or fixed caravan) which is your home
• part of a dwelling house which is your home
• part of the garden attached to your home

However, you’ll be entitled to full relief where all the following conditions are met:

• the dwelling house has been your only or main residence throughout your period of ownership
• you have not been absent, other than for an allowed period of absence or because you’ve been living in job-related accommodation, during your period of ownership
• the garden or grounds including the buildings on them are not greater than the permitted area
• no part of your home has been used exclusively for business purposes during your period of ownership

We’ve explained these definitions in the section definition of terms. If you meet all of these conditions, you will not have to pay Capital Gains Tax on the disposal. You will not need to complete the Capital Gains Tax summary pages of your tax return if you’ve made no other disposals or chargeable gains and do not wish to make any capital gains claims or elections. Read page 5 of the tax return guide for more information.

 

If you do not meet all of the conditions, you may still get partial relief under certain circumstances and you’ll need to complete the Capital Gains Tax summary pages of your tax return. This helpsheet describes the circumstances when you may get relief and explains how much relief you can deduct from any gain to calculate the chargeable gain.

 

Even if you meet all of these conditions, you will not get Private Residence Relief if:

• you dispose of all or part of your garden after you’ve disposed of your home
• you acquire a dwelling house and/or spend money on it in order to realise a gain on its disposal

For example, you may have bought the house to sell it quickly at a profit or, if you were a tenant, you may have bought out the freehold in order to increase your profit on sale. In this case, you’ll need to provide details on your tax return.

 

The bit in bold is really talking about your intention when you purchased the house. If you buy a house to live in and then some time later decide to get planning permission for a house in the garden that's ok. If you buy a house with the intention of developing part of the garden the sale will be liable for CGT or possibly income tax.

 

The following document appears to make it clear that spending money on getting planning permission or removal of a covenant should be ignored. Sending money on anything else such as installing services might not be.

 

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65243

 

Private residence relief: purpose of realising gain: expenditure

TCGA92/S224 (3)

In determining whether there has been any expenditure during the period of ownership which could trigger a restriction to relief you should ignore the cost of obtaining

• planning permission,

or

• the release of any restrictive covenant.

In practice, the gain attributable to the expenditure on obtaining planning permission or on releasing a restrictive covenant would be a matter of speculation and would most likely be small. Furthermore, it would be straightforward to arrange for the purchaser of the property to incur the expenditure thus avoiding the application of Section 224(3) entirely. Nothing would be gained by considering whether such expenditure gives rise to a restriction of relief by virtue of Section 224(3).

[Temp]

Sorry once again the formatting has gone wrong and the editor won't let me fix it. Grrr.

 

How do I make quote tags visible so I can edit them? One missplaced / and the formatting is spammed up and I can't fix it, presumably because quotes aren't meant to be edited?

Edited October 6, 2019 by Temp

[Temp]

This bit also went missing...

 

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65243

 

Private residence relief: purpose of realising gain: expenditure

TCGA92/S224 (3)

In determining whether there has been any expenditure during the period of ownership which could trigger a restriction to relief you should ignore the cost of obtaining

• planning permission,

or

• the release of any restrictive covenant.

In practice, the gain attributable to the expenditure on obtaining planning permission or on releasing a restrictive covenant would be a matter of speculation and would most likely be small. Furthermore, it would be straightforward to arrange for the purchaser of the property to incur the expenditure thus avoiding the application of Section 224(3) entirely. Nothing would be gained by considering whether such expenditure gives rise to a restriction of relief by virtue of Section 224(3).