Selling my garden and pony paddocks?

Selling my garden and pony paddocks?

11:56 AM, 15th February 2022, About 3 months ago 11

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I have two pony paddocks of about 3 acres with our house and garden (1.5 acres). The paddocks have development potential with neighbouring land being already built on, or with recently approved planning.

I am trying to work out what is the most tax-efficient way to exit, the options I see are as follows:

1) Do Nothing – sell and pay capital gains tax on the 3 acres profit of about £1m = tax at 28% of about £280k
2) Sell the fields into our existing trading property development company, then subsequently sell to the big developer effective corporation tax 19% = £190k, then the wealth is still in the company, the company would be eligible for Business Asset Disposal Relief = another £81k
3) The paddocks are on a separate title deed, could I include them in our existing property partnership. The partnership is nearly three years old, and we could incorporate it, thereby transferring the capital gain into a company. The same issue arises of wanting to extract the profit from the company, or maybe it has to be kept in the company and reinvested
4)Any other options?

Thanks for sharing your thoughts.

Albert



Comments

by Mark Alexander

12:18 PM, 15th February 2022, About 3 months ago

Hi Albert

I quite like option 3 but a lot more detail would be needed in order to answer your questions comprehensively and with confidence.

Please book a Tax Planning Consultation with Property118

by Tramp

13:20 PM, 15th February 2022, About 3 months ago

Mark, thanks for reply. Please fire any questions at me, what else do you need to know. Albert

by statex

14:26 PM, 15th February 2022, About 3 months ago

I believe that there is no tax if you sell your garden for development, that is the way it used to work as my neighbour sold part of his garden for development tax free (under 1 acre)

However I believe that only 1 acre or just over can be sold tax free, therefore would it be possible to obtain a separate title for the remaining two acres and therefore reduce the tax.liability.

I believe that only a house and 1 acre can be sold free of CGT and any land in excess of that is taxable.

The law may have changed now.

by Tramp

14:45 PM, 15th February 2022, About 3 months ago

Statex , thank you for the reply. HMRC allow upto 1.25 acre (O.5 hectare) as garden to be exempt, unless the house is something magnificent and needing larger grounds. Our two paddocks are on a separate title, do we look to channel them into the property partnership or into our existing property development company before selling onto a bigger developer. Thanks, Albert

by Alex

15:58 PM, 15th February 2022, About 3 months ago

Hi Albert

As Mark Alexander has said, there are a lot of variables at play here and likely more that you haven't even yet considered.

Time for professional advice me thinks!

https://www.property118.com/tax/book-a-consultation/

by Beaver

16:27 PM, 15th February 2022, About 3 months ago

I don't think anyone knows enough to advise here. But if you don't need the cash right now then another option could be to transfer the land into a SIPP then subsequently sell from the SIPP to a development company?

by Tim Rogers

17:03 PM, 15th February 2022, About 3 months ago

You mentioned Paddocks, I was just wondering if they might somehow fall under business or farm cgt relief?

by Mark Alexander

17:10 PM, 15th February 2022, About 3 months ago

Reply to the comment left by Tramp at 15/02/2022 - 13:20
Hi Albert

We would need to know about the ownership of each property, incomes of each owner, each owners residency status, whether any of the properties have ever been lived in by any of the owners including dates, rental income from each property, current value of each property, purchase prices of each property, rent from each property, type of each property and current financing arrangements for each property. We then need to understand your property business aspirations (short, medium and long term) and details of about your family. Ideally, we would also like to see a copy of the latest tax returns for each owner.

This is the minimum amount of information needed for us to even contemplate making recommendations. However, when we get the answers to the above questions it invariably throws up more.

by Tramp

19:34 PM, 15th February 2022, About 3 months ago

Beaver, thanks. I had thought about going the SIPP route but that is fairly full and i would like to leave the 250k headroom in the sipp for growth during the next 10 years. Still a good idea for some people.
Tim, it would be stretching the limits beyond reasonable to claim it is agricultural. It is pony paddocks and we get some rental income from our friends for the grazing, stable, water and electric. This was why i thought i could include it in the partnership let property and then either incorporate it, or sell to our small development company.

Mark, we are uk residents, higher rate tax band, using vct and seis relief. Maybe pay the tax and then reinvest more in tax relief products. Maybe time for a consultation, but done those before. Thank you also for replying. Albert

by Mark Alexander

19:37 PM, 15th February 2022, About 3 months ago

Reply to the comment left by Tramp at 15/02/2022 - 19:34
Hi Albert

Not all Consultations are the same. Ours come with. GUARANTEE of total satisfaction or a full refund.

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