Capital Gains Tax due of sale of house that has been split into several properties?

Question

I have lived in the same property in the UK for 10 years but now wish to split my house into several units and sell separately. Will i need to pay CGT on the gains from each of the sales or is there any relief i can utilise?

Answer 1

Dividing your house to sell is not likely to form a trade or an adventure in the nature of trade  unless what you are doing amounts to more than getting the best possible deal you can. It would be complicated by remaining in part of it (but not much). There is CG to calculate when any of us sell any of our houses, BUT, when it is your principal private residence there is no tax to pay. If you move out before selling, you carry on getting relief for some time afterwards, in recognition of the possibility you couldn't sell it, as pertains to the epriod when you didn't live there BUT even so you do not lose the PPR for when you did live there.

The only complexity of dividing it up is that you have to assign the correct portion of original cost to the proceeds of the bit you sell, so you need meticulous records of costs and plans of the property when you bought it, when you undertook any improvements on it, and then some acceptable method of allocating these costs to the bit you sell.

This could be as simple as a % base on square footage, or might have extra sq foot costs for a part of the house with great views. So long as you take steps to assign the value carefully, and have records proving the value, then any profit on the sale will likely be correctly calculated (and if not the taxman will be staisfied you tried hard, and won't charge penalties). You can even request valuations, if you want to, but there may be a charge. The Land Valuation office has a website you can look at.  Once you know what the profits are, you can consider whether the PPR applies, and, if the PPR is challenged by the taxman you are not at a disadvantage in working out what tax is being discussed.  You will also have a better grip on your project costs.  Can't hurt to talk to an accountant. But keep records anyway, and you may be able to save some money on accounting costs.

Answer 2

I think you should seek legal advice.

To the best of my knowledge diviving a property for retail sale does not negate your obligations with regard to Capital gains.

Speak with an Estate agent I would think they would be the best to ask, as you do have to fill out a special sale booklet on selling a property nowadays and I think they will know all the ins and outs of taxation.

Answer 3

If you sell ANY part of your PPR, it is exempt from CGT. (assuming it is under one hectare in area.) This applies whether you sell it as one part or twenty.

However, if you have decided to develop your property then it escapes CGT and become a venture in the course of trade, which is taxable as income.

Take advice.

Answer 4

I think if you sell part of your land for development but remain in the house there is some relief from CGT. But I imagine if you sell the complete plot for redelevpment or sell the development there will be full CGT. An accountant who specialises in these mattere would be your best bet.