Capital Gains Tax - Land & Wood split

[SimonFisher]

... I think his accountant is probably being a bit daft anyway, as with about 20 years of CG allowances, he may well have no liability anyway.

The Capital Gains allowance isn't cumulative.

Oh- sorry, don't understand - Does this mean he just gets the annual allowance for one year ?

Suppose you buy or otherwise acquire something five years ago with a value of £50,000 and sell it now (tax year 2014/2015) for £80,000. That's a £30,000 gain. Assuming no other gains and losses within the tax year, you get £11,000 allowance and pay capital gains tax on the remainder (pay tax on the £19,000). The fact you've owned it for five years doesn't mean you can apply the allowances for all the intervening years. It least, that's my understanding of it. I'm sure someone will correct me if I'm wrong.

[SimonFisher]

That's what I said, isn't it? If the sale was concluded at some price and that figure is recorded at Land Registry, won't the future assumption be that that figure is the land value, so as high as it can be, and the timber was of negligible value? Or are you suggesting that the lack of a recorded declared split in the sale price of the land and the timber means it's open to some future assessment?

Interested to hear a response to this - to determine whether there is a benefit in recording a valuation at this point - ie. might I be in a difficult situation in the future if we haven't done it at point of sale? The seller has informed me that he has now been in touch with the estate agent and asked them to do a retrospective valuation.

I can't see that a revised valuation, essentially a different breakdown of the price you paid, can be forced upon you retrospectively. I'll see if I can get an answer for this from a tax advisor I know.

[kateandgus]

Thanks Simon - get it now!

[oldclaypaws]

It should be noted that while CGT is payable at 18% on any appreciation over an individuals annual allowance, it isnt payable if an asset is transferred to your spouse, and any gifts of money from one individual to another aren't taxable.....

Therefore I understand (subject to confirmation by expert financial opinion) if I wanted to sell my wood which had appreciated substantially, I'd pay capital gains on any appreciation (less the annual allowance in the one year of sale) since I bought it. On the other hand if I transferred title to my wife, who then decided in a few months that she wanted to sell it, she wouldn't be liable for the bulk of the historic appreciation, having only just received it. If she then wanted to give me as a gift all the proceeds from the sale, I wouldn't be liable to pay tax on that gift. Of course it does require me to trust her that she'd give the proceeds to me and not run off with the secret boyfriend and the cash.....

They do say if you pay too much tax you need to change your accountant. You can also lose all your capital gains from disposing of a business if you reinvest it into forestry, one of the reasons buying large chunks of forest are very attractive to the wealthy.

[kateandgus]

Ooh... the plot thickens!

[boxerman]

one of the reasons buying large chunks of forest are very attractive to the wealthy.

Which is a great shame 'cos it doesn't help folk like me, who want a woodland for what it is, to be able to afford it..... From where I sit at the moment it'd be great if the bottom fell put of the market...

[SimonFisher]

I can't see that a revised valuation, essentially a different breakdown of the price you paid, can be forced upon you retrospectively. I'll see if I can get an answer for this from a tax advisor I know.

The tax advisor said:

If the transaction has completed I can't see how the seller can go back and change the goalposts. If there was a value to be attributed to the standing timber I would have expected it to be shown in the contract of sale. HMRC could well ask for the contract as proof of the split of the consideration between land and timber - given that the land is liable to CGT but the timber not!

[Terry]

Would seem reasonable then to get a value for the standing timber, adjusted for when you bought the land. That way you have some numbers to work with that the taxman can be guided by.

[Meadowcopse]

The link is to some long-winded detail that may have some relevance...
https://www.gov.uk/government/publications/private-trusts-of-land/practice-guide-24-private-trusts-of-land

I was looking up some property deeds ownership detail and the background to the phrase:
"Restriction: No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court."

Although the phrase mainly refers to who is authorised to transfer / sell, this may relate to the original post in the thread depending if the deceased plot was in joint names prior to purchase, as the ownership as Joint Tennant or Tennants in Common or a Trust may have some bearing on Inheritance Tax issues.

Handy hint prior to thinking of buying, renting or leasing a property, from the comfort of your armchair and for £6 on the official Land Registry website https://www.gov.uk/search-property-information-land-registry - view and print a copy of the deeds, this will detail covenants at the time of the existing owner's completion and any charges, court orders and ammendments since.

[davetb]

We bought our wood about 7 years ago.
12.5% of the total price was designated as the cost of the land, the rest was trees etc.
It made no difference to us, as we had put in a sealed bid for the total purchase price.
Dave