How is Value of Land Calculated when Buying/Selling PPR ..?

[Ted]

I have seen a house advertised for sale which has a small amount of land with it...As far as I'm aware CGT tax is due on land over 1 acre which accompanies a primary residence (PPR) when sold.

So for example, if a house is purchased (in the UK) as a primary residence and it has, (to keep the example simple), a total of 6 acres, then would I be correct in thinking that when the primary residence was sold that CGT tax would be due on 5 acres of land?

How or when would the value of the land be calculated a) at the time of purchase and b) at the time of sale?

What I mean is, if the house and land is purchased at the same time and it all had one total price, how is it decided how much of the payment was for the house and how much was for the land?

Likewise, when it is sold, and one price is asked for the house+land, how is it decided how much is for the house and what percent for the land?

[dcaccounting]

It all comes in as one then if you sell bits of the land etc. you then are liable for "partial disposal"

How or when would the value of the land be calculated a) at the time of purchase and b) at the time of sale?

Both prices are needed.

Here is a good help sheet for you to look through and gives you all the fancy calculations.

http://www.hmrc.gov.uk/helpsheets/ir292.pdf

Regards

Dean

p.s I take it this is an investment property?

[Ted]

It all comes in as one then if you sell bits of the land etc. you then are liable for "partial disposal"

Assuming it was all sold again as one lot i.e. House + all adjoining land.



p.s I take it this is an investment property?

It's a country cottage which has some land attached to it and is being sold as one lot. If purchased it would be for use as a PPR.

[Joyous]

The extent to which a property’s grounds can be included within the PPR exemption will depend on the size and nature of the property. The general rule is that grounds of up to half a hectare are exempt (I have no idea of how this compares with an acre). This can be increased however if the house is large enough to warrant it.

If the size of the house is disproportionately small compared to the amount of adjoining land you’ll probably have to get it separately valued. It isn't appropriate to take a straight percentage as there are many issues that could affect the value of the land.

Regards

Joy

[Ted]

So when it came to selling the property then the original purchase price of the house and the original purchase price of the land would need to be two separate figures. In order to determine how much the land had risen in value by for CGT tax purposes.

It is not currently in two separate figures as the seller is currently selling it all as one lot i.e. house + land with one total price.

So if all is purchased would the purchase value of the land be decided and documented at the time of purchase, or would the original purchase value of the land only be decided when in several years it is being re-sold?

In other words, if it is all purchased when would it be decided how much of the payment was for the land only? Now, or in the future when the house+land is re-sold?

[Joyous]

So when it came to selling the property then the original purchase price of the house and the original purchase price of the land would need to be two separate figures. In order to determine how much the land had risen in value by for CGT tax purposes.

Not necessarily. If the garden and grounds of the house exceed half a hectare it is possible to get full PPR relief if the house itself warrants it. If not relief will be restricted and the District Valuer will probably be called in to determine the size and location of the permitted area.

The method by which the permitted area is apportioned and valued will vary depending on the property. You can see guidance as to how it’s done by going to the Valuation Office’s website (www.voa.gov.uk) and doing a search on “permitted area”.

Regards

Joy