Land Transfer / Gift Tax

O

OurFella

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Hi,

A friend wants to give me some land which I intend to build a house on. The land is currently agricultural land. It does not have any planning permission attached to it. My friend would like to have outline planning permission on the land before he transfers it, in case I am refused permission and get left with land I can't build on. I've been told that this type of transfer would be subject to gift tax. If the land has planning permission its value would greatly increase as would the amount of tax owed. We have been given the following advice but we are not sure if it's legal.

1. I obtain planning permission in my name, with the land still in my friend’s name. When the land is transferred to my name its value will be low ( still at agricultural value ) because the planning permission is not my friends to transfer with the land.

or

2. My friend could sell the land to me with planning permission for a nominal fee, say a euro.

Any ideas, suggestions?

Thanks.
 
You will have a gift tax issue on the transaction. Your friend is likely to have a Capital Gains Tax issue as well. You both need professional advice. Don't think you can fool the Revenue with a "clever" idea like no. 2 or by pretending that the land is being transferred for agricultural purposes.

ps did you REALLY get advice to this effect ???!!!
 
I agree.

There will be definately CGT implications for your frien. However, there is a relief available to ofset the CGT against the gift tax arising. You need professional advise on this. I'm not just saying that as on eof those professionals but this is a really complex area and not one to be looked at lightly. There are severe implications tax wise if this is done wrongly.
 
Thanks for the replies.

Suggestion No1 came from a trainee solicitor. He thinks in this scenario the land will be valued as agricultural land because my friend wouldn't have pp on it, the pp would be in my name. The gift tax would then be minimal. He doesn't think that suggestion no2 is a runner because the land will have to be sold/valued at market value.

My friend is seeking advice from his own ( qualified ) solicitor. We are not trying to pull a fast one, we just want to find a legal way of doing this at the least cost to either party.
 
Don't rely on a solicitor for tax advice unless your solicitor also is specifically experienced or accredited as a tax advisor.

Your trainee solicitor friend could have landed both of you in serious doo-doo with their frankly daft "advice". Steer well clear...
 
option 1 won't work - planning permission attaches to the land not the individual who is granted it.
 
I rang the revenue compliance office for advice. They said that the transfer of land would be subject to gift tax, the threshold for which is €23,908. As the land, at its current agricultural value, is below that value, no tax would be due. The fact that I plan to build on the land, increasing its value in the future is irrelevant, unless I'm building to sell, in which case tax would be due.
 
My friend would like to have outline planning permission on the land before he transfers it
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As the land, at its current agricultural value, is below that value, no tax would be due
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That is assuming you buy the land as agricultural land (without PP). What will the land be valued with PP
 
I have a similiar problem :


My father transferred his farm to my brother a few years ago. He always intended to give me a site from it - but decided my broter could do that transaction after he had the farm. Now, It looks like I will now have to pay tax on this as the transfer is from my brother - not my father ? Did we mess up ?

Is it true to say it is better to transfer the land as agriculatral land, to avoid paying higher tax later when there is planning on the site and it is worth alot more?

Tim
 
I'm worried now! Maybe someone can clarify.. as this is what my solicitor was told by revenue.
If you are building your family home on gifted land you are not liable for cgt

Ruth
 
Ruth said:
as this is what my solicitor was told by revenue
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Never, ever rely on your solicitor for tax advice unless they are professionallly accredited for, and/or specifically experienced in, dispensing tax advice.

Never, ever rely on verbal assurances or "advice" from the Revenue as they won't necessarily stand over this advice if required at any stage in the future, and they specifically disclaim any assurance or guarantee that the "advice" given by their officials or employees is correct.
 
If you are building your family home on gifted land you are not liable for cgt
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You may have a liability to gift tax and the person giving the gift is liable to CGT. The land will be valued and this will be deemed to be the gift. Multiplier and other reliefs will reduce the amount liable to CGT. Any auctioneer should be able to give a value on the land now and show much the land was when purchased in the past
 
My brother gifted me 0.6 acres for the purpose of building a house. My solicitor said that there was no point in trying to say that it was just a plot of land that revenue would see it as a site not just a piece of land and as such I would be liable for Gift tax and my brother would be liable for cgt at the market value of sites in the area even though at the time there was no PP on the land. Was he correct?
 
Nobody should rely on what solicitors say about tax. They don't know anything about tax. I applied for a mortgage last sep with my fiancee to build on a site on my fathers land. I was well aware of the stampy duty, CAT and CGT relielfs on a transfer of a site to a child. We were plannin on living the site in my name until we marry so as to avoid stamp duty, CAT & CGT.
When the solicitor was returning the mortgage acceptance to the bank he put a covering letter with it stating that the land would only be put in my name to avail of the reliefs.
And of course you cannot have one name on the title and two on the mortgage. My solicitor did not have to give this information to the bank but the bank said that they had to act on it as it had been brought to their attention. Plenty of mortgages have gone through after this because solicitors don't send a letter stating only 1 name will be on title.
Be carful of Solicitors!
 
- nIf you t/f it before any pp then you can t/f it at agricultural value - however this is not as low as it used to be - certainly not in Kildare. One valuer told me that really there is not such thing as agricultural value of land anymore becuase all land is at such a premium. I got 1 acre of land valued prior to pp for €70k
As mentioned already pp relates to the land (in terms of value) not to the person who applied for PP.
- I would not reccommend t/f the land prior to pp unless you are very sure that you will get it. As a local valuer what the difference in the value of the piece of land is with pp and without.

- in relation to the other mention of land t/f to brother from father - yes this was a mistake. You would qualify for €440k CAT band for t/f from your father. The CAT band relating to t/fs from your brother is much lower (sorry don't know exact figure).

- Grovegirl - you can have one name on the title of land......& then apply for mortgage in both names. This is done regularly. In my case because we are married it makes no difference. But i know many of my unmarried friends who have done this. One of them owns the land but they both own the house built on it.
 
My solicitor did not have to give this information to the bank but the bank said that they had to act on it as it had been brought to their attention.

Just to clarify on this: patently the Bank did not know the property was to be held in one name only, they assumed both and they would have issued the Mortgage Documentation on that basis. In fact, your solicitor had no choice but to advise the Bank. In reality, you should have fully advised the Bank of all the issues, explained what you were doing and sought the mortgage in both names on that basis. The fact that you did not do that, it came to light ( inevitably) and you encountered difficulties, is not the Solicitor's fault - it's yours.

Instead of saying be careful with solicitors, it might be more appropriate to say, tell your bank and your solicitor everything, get everything in the open and do not expect your solicitor to do anything less than his professional obligations compel him to do.

mf
 
OurFella said:
Hi,

1. I obtain planning permission in my name, with the land still in my friend’s name. When the land is transferred to my name its value will be low ( still at agricultural value ) because the planning permission is not my friends to transfer with the land.

2. My friend could sell the land to me with planning permission for a nominal fee, say a euro.

Any ideas, suggestions?

Thanks.
Click to expand...

Neither options will work
1. How can you obtain planning permisssion for land you do not own?
2. You can transfer land at below market value however for tax purposes its deemed to be transferred at market value not nominal value there is specific anti-avoidance legislation to tackle transfers not at arms lenght

However there is an offset available should cat/cgt arise on the same event basically the cgt paid by the disponer can be offset against any cat due
 
bazermc said:
Neither options will work
1. How can you obtain planning permisssion for land you do not own?
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You can apply for planning permission on land that you don't own as long as you have the permission of the land owner - you must include a letter of permission with the pp application
 
I have sought advice from a tax advisor. Transferring the land now, at agricultural value without pp, keeping it below the gift tax threshold is legal. I will run the risk of being turned down for pp and get left with a field. It's a risk I'm willing to take given the money I will save. A local councilor, a local planner, planners from two neighboring counties and 3 architects have all taken a look at the land and do not see any problems. That's no guarantee of course, but it's enough for me to take a punt.
 
It's a good friend that is giving you the land...

Unless of course there using you as a test case for all there other land in the vicinity!
 
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