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Building in the garden - CGT implications

I'm currently in the process of getting planning permission to build 1 or

2 houses in the garden of my primary residence.

It would appear to me that I will roughly have the following options when permission is granted:

A - I sell the house/garden with PP to a property developer;

B - I sell only the new plot(s) to a property developer or self builder;

C - I build (and sell) the hous(es) myself.

From what I've seen in other posts on this newsgroup and from reading the applicable bits in the IR CGT manual it would appear to me (and I'm by

*no* means an expert...) that:

- Option A would simply be the sale of my PR and therefore be free from CGT.

- Option B would fall foul of what is said in Capital Gains Manual - CG64363: "land which has been fenced off from the residence or plotted-off prior to a sale for development should be excluded.". I.e. I will be paying CGT.

- Option C would also attract CGT by virtue of me selling houses that are not my PR.

I usually get these things wrong and would really appreciate it if someone more knowledgable in these matters than me could point out whether or not the assumptions above are sane....

Thanks in advance, Ger Reuvekamp

Reply to
Ger Reuvekamp
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Capital > Gains Manual - CG64363: "land which has been fenced off from the > residence or plotted-off prior to a sale for development should be > excluded.". I.e. I will be paying CGT. >

You are correct. What you have to balance is the extra CGT against what you might make if you took the other options. You might make more from option C but you would have all the work involved in getting the houses built and sold. My choice would be option A.

Reply to
Peter Crosland

HREF=

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CG64363.htm>Capital > Gains Manual - CG64363: "land which has been fenced off from the > residence or plotted-off prior to a sale for development should be > excluded.". I.e. I will be paying CGT. >

Only on the that part of the total that represents the market value of the land that you have sold. The increase in value of a house over its building costs will be taxed as income (because that is exactly what it is).

tim

Reply to
tim

This is interesting Ger, whaen you say "1 or 2 houses" are you submitting two sets of plans? Or are you asking for a vague "outline" of the sorts of planning permission which *might* be approved?

Reply to
Troy Steadman

Still in the informal stages - I will be trying for two, but may end up having to compromise - perhaps at the appeal stage. All depends on the attitude of the town planners and if turned down the reasons for not granting.

Ger

Reply to
Ger

I understand that whether the sold part of the your garden gets PPR depends partly on how big the plot is. IIRC up to 0.2 hectare is OK, or was it 0.5 hectare?

Robert

Reply to
Robert

"Robert" wrote

I think it's 0.5 hectare - just over one acre.

Reply to
Tim

The (up to) 0.5 hectare is automatic (while it remains the "permitted area") under section 222 TCGA 1992.

A larger area may be exempt, if required for the reasonable enjoyment of the property.

Reply to
Doug Ramage

"Doug Ramage" wrote

Quick question - does this include the land on which the actual building stands, or is a further 0.5h automatically allowed *outside* the house?

Reply to
Tim

Not that it should make much difference. If the area of the house is a significant enough fraction of an acre, it'll be somewhat of a manor, in which case the permitted area of garden ground will be likely to exceed the automatic acre.

Reply to
Ronald Raygun

"Timothy Lee" wrote

It doesn't really matter how small the house is, if the land area is close to the limit for CGT exemption. I can imagine a scenario with land size 0.05 acres over the limit and house covering 0.10 acres; so the question was valid!

Reply to
Tim

Reply to
Sally Riley

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