My wife and her brother inherited just over an acre of land back in 2009, which looks to be granted planning permission in the next year, so there is potentially a very large capital gains tax (CGT) bill due. Is there any way to reduce the bill, say by, 'gifting' parts to family members? Also, one adviser told me the higher rate of tax on land was only 20% but another has said it is the 28% higher rate of CGT. Can you advise which is right, please?
Arthur Weller replies:
It may be possible to gift parts of the land to family members now, before planning permission is obtained, while the value is low, so that later, when planning permission is obtained, the other family members can sell the land and utilise their personal capital gains tax (CGT) annual exemption to mitigate the overall CGT. Strictly speaking, HMRC do not like this - see HMRC guidance at www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg18150
. If the land is transferred before planning permission is obtained, the rate of CGT is 20%; see the new Schedule B1 in TCGA 1992 (introduced by Finance Act 2015, Sch 7, para 36) at paras 1 and 4.
This question was first printed in Property Tax Insider in January 2018.