Re: CGT on side garden with FPP
This issue is addressed in the FAQs on the
Revenue website
If I sell part of my garden to a builder, who builds a house on it, am I liable to pay capital gains tax?
Yes Normally when an individual disposes of his/her principal private residence and a garden or grounds of up to one acre (excluding the site of the house), then any gain on such a disposal is exempt from capital gains tax. However, where a dwelling house or garden/part of a garden, is sold for greater than its current use value, then this constitutes the sale of development land and principal private residence relief will apply only to the current use value. In general terms the difference between the consideration and the current use value is liable to capital gains tax. Development Land rules do not apply to disposals where the total consideration from such disposals does not exceed €19,050.
Example:
An individual disposes of part of his garden for €40,000. The current use value of the site is €2,000. The entire property originally cost €100,000. The market value of the property after the sale of the site is €360,000.
Step 1. Calculate the gain arising using the part disposal rules and ignoring any development land implications.
Proceeds
* * * * * * * * * * * * * *
€40,000
Cost: €100,000
* * * *
x
* * * *
€40,000
------------------------------------------------------------------------
€360,000 + €40,000
* * * * *
€10,000
* * * *
Index (say) 1.5
* * * *
€15,000
* * * * *
Gain
* * * * * * * * * * * * * *
€25,000
*
Step 2. Calculate a notional gain, as if the site was sold for current use value. This is the principal residence relief.
Proceeds
* * * * * * * * * * * * * *
€2,000
Cost: €100,000
* * * *
x
* * * *
€2,000
------------------------------------------------------------------------
€360,000 + €2,000
* * * * *
€552
* * * *
Index (say) 1.5
* * * *
€828
* * * * *
Principal Private Residence Relief
* * * * * * * * * * * * * *
€1,172
*
Step 3. Deduct 2 from 1 above. This is the chargeable gain.
Gain
* * * *
€25,000
Principal Private Residence Relief
* * * *
€1,172
Chargeable Gain
* * * *
€23,828
As in the previous example, on a subsequent disposal of the remaining property, the base cost of the land disposed of, will be the original cost less the base cost allocated to this disposal.
i.e. €100,000 - €10,000 = €90,000