With an ever-increasing demand for housing and a limited amount of land available, you may be considering whether a property could be built in your garden. Clearly, this could be very financially rewarding for you; however, there are some important tax considerations that you should bear in mind. This article will consider the potential capital gains tax and income tax implications of 1) selling part of your garden to a property developer, 2) self-building a property in your garden for onward sale and 3) self-building a property in your garden to let to tenants. 1)Selling part of your garden to a property developer If you sell part of your garden to a property developer who will develop the land and later sell the developed proper...

Multiple Dwellings Relief & Annexes: The State of Play   Multiple Dwellings Relief (“MDR”) was introduced by the Government in July 2011 such that a buyer can claim relief from Stamp Duty Land Tax (“SDLT”) where they purchase two or more dwellings in one chargeable transaction. This article is focused on taxpayers making the claim for MDR where they acquire a property with an annexe, rather than a number of distinct properties. The relief works through averaging the cumulative SDLT cost of a transaction across the number of dwellings acquired, where this should bring the SDLT rate closer to the rate applicable if the dwellings were acquired separately. However, the MDR can’t lessen the SDLT payable to below 1% of the...

Earlier this year, we published The Price is Right: Valuing Trading Companies (8 February 2021) which provided an overview of the various methodologies and principles typically used to value unquoted trading companies. In this article, we will set out how we value property investment companies and the kind of factors that must be considered in order to reach a robust valuation. When might a valuation be required? In our experience, valuations of property investment companies are typically required in the following circumstances: Inheritance tax planning Sale or transfer of shares Matrimonial proceedings Family Investment Companies It's important to note that this is not an exhaustive list, and a valuation may be requi...

The disposal of property is a chargeable event for capital gains purposes, therefore a liability to capital gains tax ("CGT") can arise. This is the case even if you swap your property for another property and no money changes hands. However, there is often overlooked CGT relief which applies where there is an exchange of interests in land which are jointly owned by two or more persons. For example, if a husband and wife are getting divorced and they are joint owners of two rental properties, roll-over relief may be available if the wife transfers her half of the first property to her husband in exchange for his half of the second property. The relief operates by treating the disposal as a no gain/no loss transaction, with the donee i...

The housing market is currently booming with the average UK house price increasing by 10.2% for the year to March 2021. One catalyst behind this surge is thought to be the stamp duty holiday due to end on 30 June 2021. However, according to property market analysts, this surge may be short lived as house prices are expected to fall again post June after the stamp duty extension deadline, where the extension to the rate bands are expected to be in place until 1 October 2021. Please check our article on the Spring 2021 Budget for further information regarding this. Amongst those acquiring new properties will be landlords purchasing buy-to-lets. With this in mind, we’ve set out 3 top tips below to help landlords efficiently manage thei...

Stamp Duty Land Tax (SDLT) is charged to the buyer on the acquisition of land in England and Northern Ireland. With the rates for SDLT typically being greater for residential land, there is an incentive for property to be deemed non-residential for tax purposes. In the case of Hyman, Pensfold, & Goodfellow v HMRC [2021], the Upper Tribunal upheld the rulings of the First-Tier Tribunal and found that land bought together with a house formed part of the garden and grounds. Therefore, the residential rates of SDLT applied on the full purchase price with no reductions given for the fact that the houses were acquired with a substantial amount of land. Background The Upper Tribunal considered three cases all with similar background f...

Only/Main Residences If you sell a property which is your only residence and has been your only home throughout your period of ownership, you will not be required to pay Capital Gains Tax ("CGT") if a capital gain arises on the disposal. This is because Private Residence Relief ("PRR') is available for the full period of ownership, reducing any chargeable capital gains to nil. This also applies if you own several residences and have elected for one to be your main residence for PRR purposes (please see our previous article Principle Private Residence "PRR" Elections: Your Options for further details of this). Call us us on 0113 887 8432 now to find out if you are eligible for PRR.  Additional Residences Furthermore, if yo...

Stamp Duty Land Tax (SDLT) is payable on the acquisition of land and property over a certain price in England and Northern Ireland. Different taxes apply if the land/property is located in Scotland (Land and Buildings Transaction Tax) or Wales (Land Transaction Tax). The tax payable is calculated using tax bands. Where the price/consideration for a property is higher, portions of the consideration may be subject to SDLT at progressively higher rates of SDLT. As a result of Covid-19, the government has confirmed that the residential rates of SDLT for property transactions between 8 July 2020 and 31 March 2021 are as follows: Property or lease premium or transfer value SDLT rate Up to £500,000 Zero The next £425,000...

On the sale of a house that you have lived in as a main residence, Principal Private Residence (PPR) Relief is typically available to reduce the gain by reference to your ownership period and the length of time that the house has been occupied as your main residence. PPR Relief applies to both the site of property and its surrounding gardens and grounds, provided that the total area does not exceed 0.5 hectares. Should the site exceed 0.5 hectares, relief may still nevertheless be available if it can be demonstrated that the larger area is required for "the reasonable enjoyment of the dwelling house . . . as a residence, having regard to the size and character of the dwelling house". In the recent case of Leslie and Catherine Phillip...

HMRC plans to send 14,000 "nudge" letters to individuals it believes may have made a taxable residential property disposal in 2018/19 but did not report it on their self-assessment tax return, thereby encouraging taxpayers to come forward and bring their affairs up to date. On the sale of residential property, capital gains tax may become payable on the gain. The taxable gain is calculated by taking the sale proceeds and deducting the original cost, the associated costs of disposal/acquisition, any costs incurred on enhancing the value of the property, and the annual exempt amount (£11,700 for 2018/19). If the taxpayer had lived in the property as their main residence throughout their period of ownership, then Principal Private Resid...