Process of buying site from Uncle

My husband and I are buying a site (.75 acres) from my uncle. He has agreed to sell us the site for approximately 50% of its current market value (current market value is ~120K). The deal is that it will cost us 60K if we buy it before he turns 55 (in April 2009) or 50K if we buy it after he turns 55. If we buy before he turns 55, he tells us that he will be liable for tax (CGT?) and will have to pass that on to us. Fair enough, we're happy with that because we're getting a great deal.

What tax will we have to pay? I understand that we will have to pay stamp duty on the market value of the land. At what point is the stamp duty calculated? Who calculates it? Solicitor? Accountant? When do we have to pay it?

What about gift tax? If we are liable for gift tax, at what stage exactly is that calculated? At signover?

Given the length of time it can take to get planning permission we would like to get the planning application process moving and apply for planning now and then wait until he turns 55 before we actually buy the site - can we do that? Would CGT apply then?

I'm confused about the exact process involved and what we have to pay and when. We asked our solicitor and she didn't know and told us to ask an accountant. Maybe someone here can help?

Many thanks,
FiveFingers

you need to go to a tax adviser. there are a number of issues here both for you and your uncle and a number of more details required.

You will be subject to gift tax on the difference between what you pay your uncle and what the site is worth (but then have a "tax free" threshold). However, if he is liable to cgt on the disposal, you can reduce your CAT liability by the CGT paid by him.

As the site would be a lot more valuable with planning permission than without, it is generally a better idea to transfer land before PP is given (as this reduces the CAT and CGT payable).

Thanks for the replies. This thing is a lot more complicated than I thought.

As the site would be a lot more valuable with planning permission than without, it is generally a better idea to transfer land before PP is given (as this reduces the CAT and CGT payable).

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This is obviously a risk as there are no guarantees of getting planning permission. What do people do if they buy the land and then don't get PP? Would it be unusual to reverse the transaction?

Going back to my original query. My uncle is exempt from CGT if he waits until he is 55 to sell us the land (at least that's his interpretation of CGT). If we apply for PP before he turns 55, get PP and then not sign over until he reaches 55, would that affect his CGT liability?

Thanks,
FiveFingers

i think your uncle is talking about Retirement Relief. There are certain conditions for this to apply which would result in no charge/less charge to CGT. Again we know nothing of your uncle's business, he's not selling at arms length and there are many complications which you should discuss with a tax adviser

Hi gongey, yes I think it's the Retirement Relief scheme he's talking about. I guess we'd better find ourselves a tax advisor. Thanks for the advice.

FiveFingers