CGT on development site with main residence

cathybun

Registered User
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My parents are selling their house, which is on an acre of land. The house will be knocked and apartments will be built on the land.

Just a few questions on the following pieces from the Revenue's website. I've put my questions on this at the end.

Points 3, 5, 10 and 12 are from the Revenue's website at [broken link removed]:

3. What is a sole or main residence?

A sole or main residence is the residence which is your home for the greater part of the time. It does not have to be owned by you e.g. your parents’ residence may also be your sole or main residence, if you normally live there.

5. Does residence only mean a house?

No. It also includes:

  • A flat
  • Any garden or grounds of an ornamental nature which are used along with the house or flat
10. If I sell my house will I have to pay Capital Gains Tax?

No. If the house (including grounds of up to one acre) has been occupied as your sole or main residence throughout your period of ownership you will be exempt from capital gains tax on the sale.

12. What happens if my property has "development value"?
Where your property has development value i.e. if it is sold for a price higher than its normal current use value then the relief from capital gains tax as outlined above is confined to what it would be if the property did not have development value.


My questions:

1. In point 3, does this include the owner's children. i.e. If my parent's sold their house while their children are living there, can they reduce any CGT by using their children's annual allowance? The children have no ownership to the house or land.

2. In point 5, if my parents landscaped the garden (it is currently overgrown), will this add to the price of the house during a valuation?

3. Point 10 contradicts point 12. Any ideas on how to get out of the situation outlined in point 12? e.g. Adding inexpensive things to the site to bump up it's value (tennis court) or would the valuer see through this? The house is in quite bad condition, perhaps it would be best to do a paint job here and there?

I would really appreciate any thoughts on this
 
Cathybun:

If this house was sold to another as a residence, despite some of the queer prices, then there would be no CGT issue. Given that the stated intention is that the house will be sold and apartments built.. its looking like that there is development value.

I think therefore that the first step is to try and ascertain what this residence could be sold for as a residence. I am inclined to think you need professional tax advice on all options.