Transfer of land to wife or children and CGT

[sackofspuds]

I have a third of an acre plot of land recently valued at £90k without outline planning permission. My intention is to obtain outline planning permission and sell it. I can't see an issue with obtaining planning permission for a couple of bungalows, given that the owner of the same sized adjacent plot managed to do so and has, in fact, built three bungalows (none have been put on the market).

I'm a higher rate tax payer. My wife is not and neither are my two daughters (both in their 20s).

I was therefore thinking about transferring the land to either my wife's name (no CGT on transfers between spouses) or gifting it to my daughters prior to trying to obtain planning permission.

If the eventual sale occurred say within a year from now, would I be at risk of HMRC concluding that I'd done the transfer purely for the avoidance of CGT?

Probably not relevant but although the valuation was for £90k there are electricity lines over part of the plot. The surveyor did point out that this might mean that a buyer of any house built there would not get a mortgage. This would severely reduce the land valuation to nearer £30k.

[DrFfybes]

AIUI if you gift the land to anyone other than your spouse then it is valued at current market value so does not exempt you from CGT (unless you gift your main residence).

Consequently gift it to your wife, she then either sells it or gifts it to the children and pays any CGT. The cost of the land to you determines the CGT liability.

The big increase in value is probably down to obtaining Planning. Given the small CGT allowances these days, the only benefit of gifting before applying for Planning Pernission would be to use both childrens' lower rate IT bands on the gain. So if the land actually sells for the lower end of your estimate you might find the costs in transferring it outweigh any tax savings, or even increase the tax if your children earn more than your wife by the time it is sold.

So you really need to know how much it is worth before making any decisions, both with and without planning permission. I'm guessing with Planning for 3 properties you could be looking at £100k per plot, so now the potential value is somewhere between £30 and £300k. And that's a huge variation in tax liablity.

Not sure what happens if you build on it, move in, and then give away your current home to your children

EDIT to add.... MrsF and I regularly transfer assets between us come ISA season in order to use our allowances and reduce our tax liablities. Nothing wrong with that.

Paul

[sackofspuds]

Thanks Paul.

I did get it valued and £90k is what the surveyor came back with. That's current value, no planning permission. You're right that it's about triple that with planning assuming 3 bungalows selling for £550k each.

Surveyor explained that if houses couldn't be mortgaged then 30% discount on sale price which results in an almost 70% impact on land value.

Think it's fair to say we would never live there ourselves. Rural without being attractive.