Disposal of farm

[Allwhite]

Hello, my dad sold off some of his farmland 7 years ago for about 400k. He was over 55 and met the criteria for the 500k tax exemption for disposal of farm outside of the family. He has recently sold some more land for development for 2 million. My question is does he have to pay capital gains on the 2 million only or does he have to pay capital gains on the land disposed of 7 years ago too and if so does a penalty apply? We will be seeking professional advice soon enough but just want to get an idea myself beforehand, thanks in advance.

 

[MOB]

"He has recently sold some more land for development for 2 million."

By this I hope you mean that he has gone sale agreed only.

"We will be seeking professional advice soon enough"

That would need to be before your father signs a contract for the sale of his land. Please be sure that he does not sign a contract for sale until his solicitor (if able to do so - about 15% are) or his accountant (if able to do so - again about 15% are) or an appropriate specialist tax adviser (any competent solicitor or accountant will arrange an appropriate referral) has reviewed and advised upon CGT and the available mitigation measures.

"My question is does he have to pay capital gains on the 2 million only or does he have to pay capital gains on the land disposed of 7 years ago too "

On the 2 million only if properly structured before contracts are signed. Otherwise, he may end up paying tax on the land sold seven years ago too.

"......and if so does a penalty apply"

No - just the original tax bill.

 

[Allwhite]

Hi MOB, thanks for your reply. So glad I posted now, yes the contracts aren't signed yet it is just sale agreed. Will definitely get a proper tax advisor involved now. I just assumed the contracts were standard and sorting out the tax would come after that. Don't think my Dad's solicitor knows about this, is there any more details you could give me so I can let him know while we try to get the tax advisor involved like what kind of amendments need to go into the contract. Thanks again.

 

[MOB]

Hi,

I don't want to be giving unduly cryptic answers, and this is certainly not about keeping information out of public readership, but some tax issues are quite complex and can be particular to the circumstances of each case. I have devised one brilliant (though I do say so myself) avoidance strategy which I have been unable to use for years because I haven't yet had a client whose circumstances fitted the strategy. (yes, I know, I should get out more). If I start giving examples of relatively complex tax planning strategies, I would be mildly concerned that someone else reading this might try to rely on what I say instead of getting the proper advice.

The important thing is that your father's solicitor knows to seek advice from a specialist. If he doesn't know who to refer the matter to, feel free to PM me. While I cannot take this on myself, I can certainly give you some names for your father's solicitor.