CGT .. build to rent?

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    CGT .. build to rent?

    I am thinking of building a new dwelling on a plot of land
    directly across the lane from my home. 'If' IR consider it
    to be part of my primary residence, I'd like to know what the
    tax implications would be if I rent it out.

    #2
    Do you already own the land in question? If so, for what purposes do you currently use it?
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

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      #3
      If you are not planning to sell it, then there are no particular implications irrespective of whether it is across the lane or in London.

      As it is, being "over the lane" then if you have garden attached to your house there are probably no implications even if you do sell it.

      Comment


        #4
        George, if you rent out the house you will pay income tax on any rent you receive (less deductions)
        However, when you sell the situation is more complicated.
        If you sell the land prior to developing it then their will probably be no CGT to pay because the land will probably part of your main residence. This situation is more complicated by the fact that there is a road between your house and the proposed development. If a road separates your home from the proposed development HMRC can challenge the PPR exemption as it is not within the curtillage of your primary dwelling. However, if it is not unusual for your type of dwelling to have a road or a lane separating it then your plan will qualify for the PPR exemption. I am thinking of some terraced houses here that normally have the garden across the back lane. However, if there is a substantial separation, HMRC may well argue that this is not part of your primary dwelling.
        If you develop the land, and that includes obtaining planning permission to build another property, then that is taxable.
        It would probably be a development activity and be assessable as trade profits if you built the house and then sold it.
        However, if your intention was to retain the property with a view to letting the property out, then CGT would be payable when you sold.

        Comment


          #5
          Originally posted by nearlybutnotquiteright View Post
          If you develop the land, and that includes obtaining planning permission to build another property, then that is taxable.
          Not at all; you're guessing at tax law again. Developing land is not, of itself, a taxable activity. Where the resulting development is retained - and has always been intended to be retained - then the only tax payable is in the event of disposal.


          There may be a s106 cost/community infrastructure levy, but neither of those would normally be described as "taxable" events.

          Comment


            #6
            Please my response before replying.

            You should also look up the difference between taxable and assessable so that you can grasp things a little better

            I clearly said that development activity would be assessable on SALE, or if the intention was to retain, CGT would be payable.

            The CIL is a local charge adminstered by charging authorities and has no relevance to HMRC other than as an expense of sale or development. Good research, but you need to apply your research correctly, and to read things properly.

            Rather laughable really because your first response on this said there were no implications, then you have changed your mind by the time you get to your second response when you say tax is payable on disposal.

            Comment


              #7
              Originally posted by george128 View Post
              I'If' IR consider it
              to be part of my primary residence, I'd like to know what the
              tax implications would be if I rent it out.
              Originally posted by Telometer View Post
              As it is, being "over the lane" then if you have garden attached to your house there are probably no implications even if you do sell it.
              Originally posted by nearlybutnotquiteright View Post
              Rather laughable really because your first response on this said there were no implications, then you have changed your mind by the time you get to your second response when you say tax is payable on disposal.
              Not at all. I answered OP's question, which is "IF this is considered to be a part of my residence, what are the tax implications", to which the answer is "none".

              Keep trying!

              Comment


                #8
                To rent the property out as a self contained unit you would need to gain planning for it to be a new dwelling and so it would cease to be part of your PPR when built. If you built and sold the property you could reclaim the VAT on it's construction costs but would pay Income tax on the profit. If you retained ownership and rented it out you would not be able to reclaim the VAT on the build, would pay income tax on the rent received and would have CGT to pay on disposal.

                Comment


                  #9
                  Are all those who think they are knowledgable about tax matters as bad tempered as some of the people on this forum ?

                  I suspect there are many who shy away from asking advice in case of ridicule or cynicism.

                  I for one am getting a little tired of it.

                  Comment


                    #10
                    CGT .. build to rent?

                    Thank you to all. From what you say, it doesn't seem that building to rent would be a sensible thing for me to do with the plot. Forgive my ignorance,
                    but as I bought the plot as part of the original purchase (as with the previous 2 conveyances) how would IR go about putting a value on plot before it was developed when working out CGT on new dwelling? Also, would CGT be the same if it was gifted to my children.

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