Selling after having built a gite

[Gyn_Paul]

My friends down the road bought and renovated a property within the last 5 years. In the process they constructed a gite from a barn which they run as a business (registered and taxed etc.obviously).

They are now thinking of selling up and going back and are toying with the various options of selling both properties. They have an appointment with a Notaire, so it is hoped they will get some hard - and accurate - facts from him, but in the meantime, every Estate Agent tells them a different story with respect to the tax liabilities.

Anyone have personal experiences?

p

[Baz]

I would only take the advice of the Notaire as he or she will be responsible for collecting the taxes at the completion of the sale. The agents are are probably only offering an opinion as their interest is in obtaining the properties on their books and making a sale. I found when completing my previous sale that I was telling the agents things they did not even know and all the help I got was from a very knowledgeable Notaire.

Baz

[Victor Meldrew]

We have been there and done it and as they say read the book, got the t-shirt and am now making the movie.

We sold our property having converted a barn into a gite and obtained planning for several other gites on the same site. When we sold, we had a meeting with the estate agent, the notaire and the purchaser to sign the comp de vente, at this point we were told by the agent that we would have to pay TVA at 19.60% on the value of the gite (less any TVA reclaimable from receipts for work or materials which we could supply) as it was classed as a new build. The property was divided up into 3 parts, the main house, the gite and the remaining buildings. 

In the several months that followed, we were given the amount in writing by the notaire that we would have to pay in tax for the TVA on the gite only, which we accepted. However on that day of signing the Act, we were informed by the notaire in front of our purchasers and the agent that we would also have to pay capital gaines tax (only on the gite, even though it was still part of the same overall property)  as we had not had the property for MORE than 5 years, nothing on this front had been spoken of previously .

The net result was that we ended up very much out of pocket and there was nothing we could do about it as we had agreed to the sale when signing the comp de vente.

If you do wish to sell, make sure you are advised on both TVA and Capital gaines by your notaire in writing and do not get caught as we were by so called estate agents who just seem to tell you what they want you to hear so that they can get a sale.

Hope this is of assistance.

Regards

Victor 

 

[BJSLIV]

Victor's description of the situation describes how one would expect the finances to pan out. Many Notaires are quite cooperative in maximising the costs of the gite so as to minimise the tax liability.

The good news is that to have capital gains tax to pay, you must have made a profit, so you won't be entirely out of pocket!

[Ron Avery]

"The good news is that to have capital gains tax to pay, you must have made a profit, so you won't be entirely out of pocket!"

Surely the CGT is payable because the property being sold is not the principal residence.  People I know who have sold off part of their properties, in one case a barn and lake, and another a gite, have all paid CGT.

[Victor Meldrew]

The bad news is that,

1, when you bought the property, the value of the barn was not individual but part of the "global" price. This would now be an individual price and as such would show a large profit.

2, If you have a house on the same site as we did, then that is classed as maison principal and the "gite" is maison secondaire. I know, it could only happen here in France.

The good news is that,

Capital gaines is only paid on profit, but how do you value something that previously had no or very little value. You take a rough estimate and hope that it does not equate to too much in tax.

Victor   

[BJSLIV]

 it could only happen here in France.

It can also happen in the UK if part of a large property is sold off.

As I said earlier its good if you have a friendly notaire who apportions the maximum cost to the gite, both in terms of purchase price and works, whilst minimising the sale value.

The real surpsie in France is the VAT on selling a newbuild/refurb within the first five years. That even comes as a bit of shock for people selling their main house.

[Gyn_Paul]

So what would there be to stop them closing the business at the end of this year and 'amalgamating ' the gite back into the house, prior to selling, I wonder?

p

[Victor Meldrew]

It depends on wether the gite is attached to the house or a seperate unit as ours was.

Also how is it advertised with the estate agents? either as say a three bed house and two bed gite or if it is attached a five bed house. The latter would command less money than an up and running gite business.

 Victor