Capital Gains Tax on partial sale of site

[confused by tax]

Hi

Wondering if anyone can help with this query.

We are looking a purchasing a house (this would be our primary private residence)which will be part funded by a loan from a family member. if we were to subsequently sell a part of the site (to build a house on) to the family member for the same value of the loan are we likely to be liable for CGT?

Appreciate any feedback.

 

[torblednam]

First thing you need to do, is forget about the loan. It's irrelevant in the context of CGT.

Secondly, you need to understand that while there is a total exemption from CGT on disposal of a PPR, it applies only to the "current use value" of the property i.e. its value for its current use as a residence (or in the case of part of the garden, its use as a garden).

Thirdly, you need to understand that for CGT purposes, transactions between connected persons (such as family members), are taxed based on the market value of the property involved, regardless of the actual amount of money changing hands.

Finally, the quick answer to your question is that yes, there's likely to be a CGT liability.

 

[confused by tax]

First thing you need to do, is forget about the loan. It's irrelevant in the context of CGT.

Secondly, you need to understand that while there is a total exemption from CGT on disposal of a PPR, it applies only to the "current use value" of the property i.e. its value for its current use as a residence (or in the case of part of the garden, its use as a garden).

Thirdly, you need to understand that for CGT purposes, transactions between connected persons (such as family members), are taxed based on the market value of the property involved, regardless of the actual amount of money changing hands.

Finally, the quick answer to your question is that yes, there's likely to be a CGT liability.

Thanks for the reply, I've seen revenue's examples and I think I understand it, I presume the deemed current use value has to be provided by a QS or Estate agent and cant just be a figure plucked from the sky?

 

[torblednam]

Thanks for the reply, I've seen revenue's examples and I think I understand it, I presume the deemed current use value has to be provided by a QS or Estate agent and cant just be a figure plucked from the sky?

It's a self assessment tax system - you put whatever figure you believe to be correct on your tax return.

If there's any doubt about any entry, you can indicate an expression of doubt. But I doubt that "I couldn't be bothered shelling out for a professional valuer" would be acceptable to Revenue as a valid expression of doubt.

You just need to be realistic about this. You can pretty much answer the question by subtraction. If on day 1 you had been buying the house and grounds, minus the bit that's now being sold on to the relative, how much less would you have paid??

I'd hazard that it won't be more than 10-20% of the price, unless it was a pretty amazing garden, or unless the purchase price itself reflected the development value of the site.