cgt on land belonging to 2nd home

[jane01]

We have a second home that we currently rent out as a holiday home. It isn't (and hasn't ever been) our PPR. It has 2 sections of garden and we are looking to sell the second section (along with 2 neighbours who are also selling their similar plots) to a developer to build houses on.
I accept we are liable for CGT on this transaction, but I'm not sure how I would calculate how much the piece of land was worth when we bought it (as part of the house purchase), and therefore what the gain would be.
Does anyone know the accepted way to assess the value of land tied to a property?
Many Thanks.

[Tax Accountant]

We have a second home that we currently rent out as a holiday home. It isn't (and hasn't ever been) our PPR. It has 2 sections of garden and we are looking to sell the second section (along with 2 neighbours who are also selling their similar plots) to a developer to build houses on.
I accept we are liable for CGT on this transaction, but I'm not sure how I would calculate how much the piece of land was worth when we bought it (as part of the house purchase), and therefore what the gain would be.
Does anyone know the accepted way to assess the value of land tied to a property?
Many Thanks.

I would think that you will need to seek advice from a valuer.

I would guess that the garden land would be valued on the basis of ''agricultural land'' basis. I would not be surprised if the value is less than 5% of the original cost.

Ramnik

[diego]

I'm not sure if you already know this but I thought I'd outline the mothod of calculation. I think the following formula is appropriate

cost x disposal proceeds / disposal proceeds + value of the remaining land

As Ramnik indicated, a valuation should be obtained for the remaining land.

[Chartered Tax Adviser]

It may not be too late to "accept that we are liable to CGT on this transaction".

There is a popular misconception that you can only elect for a property to be your PPR if it is your PPR. Where you have two properties which are both ocupied by you as residences, you have a right to elect which property you would like treated for capital gains tax purposes as your PPR.

There is however a time limit of two years to make the election, but two years from when ? Two years from acquiring a new residence, but what is considered as acquiring a new residence ?

- It can be purchasing a new property which is used as a residence
- It can be taking on a lease or tenancy for a property to be used as a residence (even if only for 6 months - sometimes a useful planning tool if the two year deadline has passed)
- It can be the end of a tenancy on an existing property which is then used as a residence.
- The HMRC manual also suggests the sale of a residence can also re-start the two year clock

There may be scope to reduce the gain and you are wise to have sought advice prior to selling. Other tips are not to fence off the garden prior to sale. As soon as you fence it off it is unlikely to be treated as your garden. Also take some photos which clearly show the plot is your garden.

Feel free to contact me for more advice. First discussion/meeting (within reasonable distance) free. Make sure your affairs are looked after by a Chartered Tax Adviser.







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The above is for the information of readers. Whilst every effort is made to ensure accuracy, information contained may not be comprehensive and recipients should not act upon it without seeking professional advice.
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[Tax Accountant]

I do not consider that you would be able to successfully nominate the second property as your main residence even if you do not fence off the garden prior to selling. Just living at the property would not be the same as using it as your home.

Ramnik