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Capital gains tax again - but slightly different this time.


Bobdude

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As I understand it, the idea of Capital Gains tax is if you buy a property for - say - £50,000, then re-sell a couple of years later for - say - £60,000, you are liable to whatever the percentage is of the actual gain i.e. £10,000. BUT, what if you buy the said property for £50,000, divide the land, keep the property with a proportion of the land, and sell the rest of the land for new build, say for £25,000? How on earth would you work out liability, if any, to CGT in that case?
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Local experience is that they do not try to apportion the cost price but treat the disposal as a reduction of the cost until disposals add up to more than the original cost. Please do not treat this as a statement of the law but it is what hapenned when a couple of cottages were knocked through, the gardens married up and the excess sold.
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[quote]So would that mean that, for example, if we were to hang on to the house for two or three more years, Capital Gains would not be an issue until and unless we decided to sell? Thanks![/quote]

IANAL, but;

I think that Anton is right. I.e. If you buy a property for 100,000 and divide it up into 10 lots (cost 10,000 each) which you sell for 20,000 each you will not pay CGT until you sell the 6th plot, whereupon you will pay the CGT on 20,000, as at this point you will have raised 120,000, and so on.

The "reduction over time" issue only applies when you actually pay the CGT, so if it takes you 15years to sell the 6th plot, then none would be payable (provided the property was your primary residence.....) etc etc.

We are about to go through this as we are developing and splitting up a couple of properties. C'est facile! says my Notaire - like, yeah, man....

Clear as mud, eh?

Ask a Notaire...

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