Gifting A Plot Of Land

I have a two acrea piece of land . I have applied for planning permission from the council to build 13 self build houses on the land ,the plots will be for self build and sold to people at 80 % market value who have a local connection.I want to give one of the plots to my daughter,for her to build a house on for herself to live in.The planning permision is not yet granted but should be agreed, if at all, by end of January 2017.How can i go about gifting the plot and what would be the tax implecations? The land at present only has an agricultural value , if it is passed with planning permission the plots will be sold at approx £100,000.each.

1 Answers

It's a very good idea to do this for your daughter, because when she sells in the future, she should also make a substantial financial gain (due to self building having lower cost than off the peg property) and this would be a super bonus, entirely tax free, assuming that the property she builds is to be her main home?

If you gift the plot with planning and the plot is exactly the same size/value as the other 12 plots - you will be gifting your daughter 100k (i.e. it will have the same market value as the other plots that you sell.) This will be regarded as a potentially exempt transfer (PET) for inheritance tax purposes and as long as you survive for 7 years from the date of your gift, your daughter will not have to pay any inheritance tax on the plot (house if she's built it) when you die.

You, yourself, are liable to capital gains tax at the time of making the gift and the tax due will be calculated based upon the increase in value of the gift (plot with planning in this case) between the time you originally acquired it and the time you gave it away.

Put simply, if you had only one plot ( a piece of land which when you first owned it, had an an open market value of 50k) and later gave it to your daughter, with planning in place and an open market value of 150k at the time of the gift, the gain is 100k MINUS your capital gains tax allowance and any other allowable expenses such as cost of getting planning etc. In your case, assuming you do get planning for 13 fairly similar plots/dwellings - you would be able to deduct 1/13 of the overall planning costs from the capital gain on the gift to your daughter. The rest of the planning costs incurred (the other 12/13) would have to be deducted from the gain on the other 12 plots.

Also, remember that you only have one capital gains tax allowance (11100?) each tax year so you can't use it against the gift to your daughter AND ALSO use it against the sale of the plots if it all happens in the same tax year! BUT - you could gift your daughter her plot with planning before 5th April 2017 and use your CGT allowance for this tax year (assuming you haven't used it for any other gains made in this tax year?) THEN you could start selling the plots AFTER 6th April 2017 and make use of your new tax year, CGT allowance against the gain on those.

Hope this helps.