CGT on selling piece of land attached to PPR

L

Lauren

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Hi all,
An elderly relative of mine is selling a portion of land he currently owns (corner block, attached to his house) so that someone can build another similar house. Can anyone advise what amount of CGT is payable on the sale proceeds and if the fact that he has lived in this house as his PPR for over 40 years has any bearing?
 
Hi Lauren

Your relative will indeed have a CGT liability, as the land clearly has development value. The amount of the liability can only really be determined by examining the specific particulars of the case including valuations etc.
This sounds like a prime example of a situation where a good professional advisor should be able to help to minimise the liability that might otherwise arise without the benefit of tax advice.
 
He has reached an agreement and will receive 80k and the land will be redeveloped as a house similar to his own.
 
As I said above, it should be possible for your relative to minimise their CGT exposure IF they take proper professional advice.

Their advisor will have to take into account several specific factors, including the relevance (or otherwise) of at least one particular tax planning strategy, to determine the CGT liability.

Without tax planning, your relative can budget for a CGT liability of almost 20% on the €80k proceeds.
 
Ubiquitous, appreciate that he needs to get some advice which he will do but what kind of things can reduce the liability? He is an OAP for example with no other assets, minimal income etc. When you say advisor, do you mean an accountant or is there a specific professional he should approach?
 
I could be wrong, but there may be some provision in the CGT legislation where anyone can dispose of up to 1 acre of land which is attached to their PPR without having to pay CGT. But, as always, professional advice is best.
 
Joe1234 said:
I could be wrong, but there may be some provision in the CGT legislation where anyone can dispose of up to 1 acre of land which is attached to their PPR without having to pay CGT.
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...not when the land has development value
 
You can sell 1 acre of land only where you are also selling the house, normally revenue will allow you to dispose of house and up to 1acre of land, but if only disposing of the land, then is classified as development land and chargeable in full to CGT. The bent/most tax efficient means would be to build on the land and move PPR to new house and then sell existing house - incurring no tax liability, as sale of PPR, but in this case this isn't probably wnat your relative would want to do.
 
cloughy said:
You can sell 1 acre of land only where you are also selling the house, normally revenue will allow you to dispose of house and up to 1acre of land, but if only disposing of the land, then is classified as development land and chargeable in full to CGT. The best/most tax efficient means would be to build on the land and move PPR to new house and then sell existing house - incurring no tax liability, as sale of PPR,.
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Sorry but incorrect on both counts.
 
Sorry but incorrect on both counts.
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Ubiquitous, why not elaborate as to what exactly the problem is with the suggestion put forward (which seemed reasonable to me).
We all appreciate that professional advice is required when entering into such transactions, but surely the point of a site such as this is to help people gain a basic understanding of the issues. God knows I've sat through many meetings with accountants, where I see the advisee sit and nod in agreement, then come out with a question which shows that they've not understood one word of what has been said, in addition, just because someone is a professional does not mean they will have adapted to changing legislation/market etc (leaving CPD aside here), they might therefore give good advice, but not necessarily the best advice.
 
Your point is well made.
Im neither an accountant or a CGT expert!

However, I think the point about the '1 acre' is OK, provided its 'current use value' is not such as to regard it as development land.

If you sell your PPR including a 1 acre field say in the country, and you get no premium in the the selling price in excess of what the excess field would achive for say agricultural use, the the 'current use value' is not exceeded and the transaction does not attract CGT.

However, if you get a higher price for the excess land than this, then it is regarded as a CGT gain transaction. You dont need to have planning permission for it to be valued higher, you just need to sell at a higher price maybe in anticipation of planning for it to be liable for CGT.
 
ubiquitous said:
Sorry but incorrect on both counts.
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can you tell me what was wrong with the details in my posting ? because as far as I am aware (am an accountant, but not practicing as one so maybe a little out in term of changes to tax affairs), but what I said regarding the sale of PPR and land, from the revenue website

"A gain on the disposal of a principal private residence including grounds of up to one acre is exempt, provided the house had been occupied by the individual as his/her only or main residence during the individual's period of ownership."

which is what I said in my posting,

and the second point I made about developing in the site by the owner and then selling the PPR is not subject to CGT is also correct as is the most tax efficient, but as I stated this maynot be what he/she wants to do.

If they dispose of the land on its own then will be subject to tax at 20% because it is development land and per revenue giudelines:
The standard rate is 20%.

Development Land

Disposals of Development Land on or after 1st December 1999 are liable at 20%. Disposals of Development Land in the period 3rd December 1997 to 30th November 1999 were liable at 40% with the exception of three categories – see CGT 1 Guide for details.

Computation of Gain Deductible Expenditure
    • The cost of acquisition including incidental costs
    • Enhancement expenditure

      Subject to certain restrictions, this expenditure may be adjusted for inflation. This adjustment is not made to expenditure incurred on or after 1 January 2003 or to the period from 1 January 2003 to the date of disposal, where expenditure was incurred before 1 January 2003. Multipliers are available under
Please let me know where I was wrong,
 
cloughy said:
"A gain on the disposal of a principal private residence including grounds of up to one acre is exempt, provided the house had been occupied by the individual as his/her only or main residence during the individual's period of ownership."
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This statement is correct in about 99% of cases. However where the value of the property includes a premium for development value (actual or "hope value") the PPR exemption does not apply to this premium.

cloughy said:
"The best/most tax efficient means would be to build on the land and move PPR to new house and then sell existing house - incurring no tax liability, as sale of PPR"
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This is indeed a potential solution but hardly one for an elderly person to undertake, especially as they have limited means (as pointed out by the OP). I would strongly contest the notion that it is either the best or the most tax efficient (especially when the person would face a VAT charge of at least 13.5% on the construction cost of their new home).

There are other options that provide better results on both counts.

If the person involved gets good professional advice they will be in a position to obtain these results. They should take extreme care in selecting an advisor to advise them on this topic as in Glenbhoy's words...

just because someone is a professional does not mean they will have adapted to changing legislation/market etc (leaving CPD aside here), they might therefore give good advice, but not necessarily the best advice.
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