Tax on selling part of your garden
If you have a large garden or other grounds you may consider selling part of the land separately from your property.
If the land was part of your main home the capital gains tax base cost would be the appropriate part of the cost of the house and land.
If you have occupied the property as your main residence any gain on a disposal of this would be exempt from CGT as you should be able to obtain principal private residence relief on it. This will continue to apply after the April 2008 CGT changes.
However, when a residence has gardens or grounds with it, the extent of the garden or grounds of a person's residence which automatically qualifies for relief is 0.5 hectares (approx 1.25 acres) ie if the garden or grounds do not exceed this area relief for the whole of the garden or grounds is automatically due.
If the garden or grounds exceed this relief may be available for a larger area if the grounds are required for the reasonable enjoyment of the house as a residence, having regard to the size and character of the house.
Therefore if the land in your case exceeds 1.25 acres, it is necessary to show that the grounds are required for the reasonable use and enjoyment of the property.
This is frequently a matter that will be looked at by the district valuer, and he will bear in mind
- the size and character of the dwelling house
- what part of that dwelling house has been used as its owner's residence.
- what land is required for the reasonable enjoyment of that residence.
Note that the permitted area (ie the area that meets the reasonable use and enjoyment test) is a specific area, and as well as determining the extent of the permitted area the District Valuer will determine where the permitted area is. Therefore in order to obtain relief on the land/gardens on a future disposal you would need to show that these grounds were required for the reasonable use and enjoyment of the property.
- the size and character of the dwelling house
- what part of that dwelling house has been used as its owner's residence.
- what land is required for the reasonable enjoyment of that residence.
Note that the permitted area (ie the area that meets the reasonable use and enjoyment test) is a specific area, and as well as determining the extent of the permitted area the District Valuer will determine where the permitted area is. Therefore in order to obtain relief on the land/gardens on a future disposal you would need to show that these grounds were required for the reasonable use and enjoyment of the property.