Seems a bit of a grey area from what I can tell, but I’m wondering if any tax bods can advise please. Directly alongside our house we have a detached barn, approx 30ft x 15ft, which I currently use as an office & entertainment room. We’re going through the process of selling the barn and a coresponding strip of land behind it to a local developer who intends to apply for planning permission for conversion to a 2-bed house. Our sale to him is dependant on the planning being granted.

My question is whether we’ll be liable to pay capital gains on the proceeds or not. Any thoughts? Cheers!

I am no tax expert but have some knowledge I would say as its part of your princial private residence no tax liability arises.

Insist on cash…..

😉

Insist on cash…..

ha, but then I might be tempted to go out & buy a LOT of dream bikes. Actually now that you mention it…

If it was me, I’d be getting the planning permission myself at the very least as it becomes more valuable.

If it was me, I’d be getting the planning permission myself at the very least as it becomes more valuable.

Cheers we’ve had advice from the property side of things & it’s actually financially better for us to do it this way (depending on the tax implications!). The developer is offering us about £100k less than the completed project would be worth on the market, and development costs to us would easily be in the order of £100k…plus of course the time/hassle.

That’s not what mf is saying….

Developer is potentially getting it on the cheap. You get the Planning – that is what unlocks the higher land / property value

Developer is potentially getting it on the cheap. You get the Planning – that is what unlocks the higher land / property value

Exactly – for example, it might be worth, say, £50k now but for the cost of a few drawings and an application (around £1.5k) it might then be worth £75k.

Should be covered by PPR if you have less than an acre of land – see Revenue website

Yep I understand but the advice we’ve received from a couple of estate agents specialising in devlopments suggests that, and I quote one of them, we should “bite his arm off” 🙂 Developer wants to keep it for his private portfolio long term hence why I think he’s prepared to pay quite a bit for it.

Awesome link, thanks mefty. Pretty sure we’re under an acre or so.

Fair enough pedalhead, if that is the professional advice you’ve been given.

🙂

you have got me thinking again now though so I’m gonna run it past our solicitor one more time!

Do I get 50% of any additional revenue you may get for my advice? 😉

The developer is offering us about £100k less than the completed project would be worth on the market,

The developer is offering you what the land/barn would be worth if/when full planning permission is granted? He’s either brave, daft or very confident of it being granted in that case. Has he (developer) already put the planning app in? Can be a reasonably lengthy process I think, depending on local objections, consultations periods etc.

Edit: agree that doing the build yourself would be a big hassle though.

Do I get 50% of any additional revenue you may get for my advice?

and I’ll have the other 50% 😆

Is the Agent cosy with the developer…?

The developer is offering you what the land/barn would be worth if/when full planning permission is granted? He’s either brave, daft or very confident of it being granted in that case. Has he (developer) already put the planning app in? Can be a reasonably lengthy process I think, depending on local objections, consultations periods etc.

Edit: agree that doing the build yourself would be a big hassle though.

Little risk to him though as the deal only goes ahead if he gets planning permission, and no risk to us as he’s covering all legal fees. He’s also probably quite confident as he’s just built half a dozen houses adjacent to our plot (grrrr).

Do I get 50% of any additional revenue you may get for my advice?

Allow me to consult my solicitor wife on that one… 😆

Worth noting that link is from 2004, capital gains tax rules have certainly changed significantly since then!

The barn sounds like it’s on your door step. I’d think about taking steps to ensure that any developer builds something that you’re happy living next to. My fathers house has convenants over 2 adjacent properties after a similar situation. They can’t add windows over looking his porperty or build any further extensions. Something like that might be worth looking into.

Lastly, you’re devaluing your own home, I’d be interested in getting an idea of by how much if I were you.

Yep cheers Horatio, to add more complications, we’re actually putting our house on the market soon as well. Obviously the barn issue will complicate things for any potential buyer of our house, but we stand to make a significant profit (£70k to £90k from two valuations) compared to the loss in value of our house without the barn & slice of garden.

Didn’t notice the date on that doc. I’ll see if I can find a new one.

just for thread completeness, here’s a link to the latest version of that document…

http://www.hmrc.gov.uk/helpsheets/hs283.pdf

I don’t much like the sound of this bit…
“Similarly, land which at the date of disposal has been fenced or divided
off from your garden for development, or has been developed or is in the
course of development (for example, excavations under way for foundations,
roads, services, and so on) will not qualify.”

Might need to tread carefully so that none of these conditions are met at time of transfer.

to add more complications, we’re actually putting our house on the market soon as well.

Try to get the property developer to buy it as part of a deal with the barn?

Try to get the property developer to buy it as part of a deal with the barn?

Good advice 😀

Yeah tried that, he couldn’t make it work as our plot is a funny shape & can’t accommodate the number of houses he’d need to make it pay.

Sounds like he knows exactly what he is doing. And because he knows exactly what he is doing I would be very suspicious of anything he agrees to as he will just be seeing ££££££££££££££££££££££££s

Oh yes he definitely knows what he’s doing. This is small fry for him. Fortunately we have a rather handy solicitor on the case (my father-in-law 🙂 )

Sorry about that – did not see the date but it is pretty irrelevant as this law has not been changed for years – don’t get too het up about fencing etc, you will be fine, it has clearly been used as part of your residence.

cheers mefty…and everyone else!

Yeah tried that, he couldn’t make it work as our plot is a funny shape & can’t accommodate the number of houses he’d need to make it pay.

Just because he “can’t” doesn’t mean someone else can’t.

Personally I’d get planning myself on the barn and then sell/auction the house and barn at the same time but in two lots – odds on you will get more money and the whole affair will be easier.
If the developer is that keen he will buy it at auction.

Selling your house with someone else already owning the barn (and with no actualy plans showing how they’re going to develop it) will limit your options…….I would be very wary of buying a house in that situation.