capital gains tax problem?

Discussion in 'Tenant Farming, Subsidies, BPS & Legal Issues' started by betternextyear, Jan 29, 2019.

  1. betternextyear

    Location:
    salop
    I am in the enviable or not ,position of having to pay c.g.tax on the sale of some land, 2 acres. What can I do to reduce tax payable. Roll over relief is probably not relevant. I have spent quite a bit on a new farm building and some farm maintenance jobs that were seriously overdue drainage and fencing etc. Entrepreneurs relief?
     
  2. Still Farming

    Still Farming Member

    Location:
    Glamorgan Wales
    Any un used trading losses ?
    New tractor ?
    Gifted or split assets before sale,?
     
  3. David.

    David. Member

    Location:
    J11 M40
    I believe you can back date some of the relief onto capital improvements you have already made.
    Ask your accountant.
     
  4. chaffcutter

    chaffcutter Moderator

    Location:
    S. Staffs
    Rollover is fine into farm buildings as long as the land sold and the building are both used in the business, none of the maintenance jobs will qualify though but they are an expense against income tax anyway.

    Why do you think RoR is not relevant?
     
  5. My understanding for ROR is that ALL the money received has to be spent on a qualifying asset. But i made have misunderstood my accountant.
     
  6. Goweresque

    Goweresque Member

    Location:
    North Wilts
    Entrepreneurs relief would only apply if you gave up farming entirely. You have to sell a business in its entirety to qualify, you can't sell one field off and go on farming the rest for example. You don't have to stop being in business entirely (ie retire completely) but you do have to leave the business thats generating the gain. So if you owned a farm and a shop you could sell the shop and claim entrepreneur relief and still keep farming for example, as farming and shop keeping are different businesses.

    That is my understanding too, though mine did say there can be some wiggle room if you're spending 95%+. Also that building new buildings with CGT gains does not qualify for RoR either, you have to buy a pre-existing asset. I have asked my accountant on this specific point several times and that has always been his answer.
     
  7. Still Farming

    Still Farming Member

    Location:
    Glamorgan Wales
    Depends what field sold off for maybe too?
    If 50k to horse person or 500k for houses?
     
  8. Goweresque

    Goweresque Member

    Location:
    North Wilts
    No, a gain is a gain, regardless of who the sale is to. Its purely a numbers thing.
     
  9. Still Farming

    Still Farming Member

    Location:
    Glamorgan Wales
    You mentioned shop and farm above as different that's all?
     
  10. Goweresque

    Goweresque Member

    Location:
    North Wilts
    Thats for entrepreneur relief, you have to sell the whole of a particular business to qualify. Who buys an asset and what they plan to do with it is not relevant for the the tax position of the seller.
     
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  11. Nearly

    Nearly Member

    Location:
    North of York
    Repair everything.
    New tyres all round.
    Fencing, drainage.
    Cgt is at a historical low so pay it and enjoy the proceeds.
     
  12. Hereward

    Hereward Member

    Location:
    Peterborough
    You can improve an asset you already own, my understanding this could be buildings.

    I believe many farms put up new Grain stores as a CGT roll over relief.
     
  13. Goweresque

    Goweresque Member

    Location:
    North Wilts
    If thats the case (and I hope it is and my accountant is wrong, it could save me some money!) you'd still have to spend all the gain on the new buildings etc to qualify, you can't spend half on something and pay the tax on the other half, and keep some cash in your hand.
     
  14. chaffcutter

    chaffcutter Moderator

    Location:
    S. Staffs
    You only have to spend all the proceeds on a RoR claim to pay no tax at all, if you spend less then the remainder will still be subject to tax. Our accountant always used to say that too but I’ve done enough of them now to know it’s not quite true, except to pay no tax at all.
     
    Hereward likes this.
  15. Goweresque

    Goweresque Member

    Location:
    North Wilts
    I thought you had to spend the vast majority (90%+) of a gain on qualifying assets to get RoR? That you can't just pick and choose - say a gain £100k, and spend £30k on a new barn, and pay tax on the other 70k?
     
  16. chaffcutter

    chaffcutter Moderator

    Location:
    S. Staffs
    No, you can do exactly that. And you have three years forward to use up part or all of the rest. You can also apply any or all of it to a qualifying asset purchased within the previous year.

    The CGT becomes payable 31Jan in the tax year following the tax year of the disposal, if you have to pay it and subsequently invest in another asset, you can claim it back.

    Buildings and fixed plant qualify, also holiday lets as a business subject to minimum occupation rules, helicopters and aircraft!
     
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  17. Hereward

    Hereward Member

    Location:
    Peterborough
    As I understand it too.

    The confusion comes in, that you have to roll over the full amount not just the gain.

    E.g. sell a field for £100k and make a £10k gain

    You have to spend £100k on a qualifying asset to get full relief not just the £10k gain,

    If you spend £50k on a qualifying asset you will get 50% relief so still have CGT to pay on 50% of the gain.
     
    chaffcutter likes this.
  18. chaffcutter

    chaffcutter Moderator

    Location:
    S. Staffs
    This ^^^^^^ sorry I hadn’t twigged the confusion between the gain and the total sale price, @Hereward is correct
     
  19. Goweresque

    Goweresque Member

    Location:
    North Wilts
    But what if the gain is the vast majority of the sale proceeds?

    Say you have owned some land since the year dot, and its valued at 1982 values (2k for sake of argument), and you sell it for 10k/acre. So lets say a 100 acre block, base value £200k, sale value £1m, gain of £800k. Am I right in thinking in such a case you'd have to spend all the gain (ie over 800k out of the sale proceeds of 1m) on qualifying assets in order to claim any RoR at all?
     
  20. Still Farming

    Still Farming Member

    Location:
    Glamorgan Wales
    Right big palatial grain complex that would be???
     
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