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Tony Tax
Tony Tax, Tax Consultant
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If I purchase a plot of building land from my father, on which

Resolved Question:

If I purchase a plot of building land from my father, on which I built a house in 1992,are there any taxation problems if he sells it to me at a figure well below its market value. He wants to gift the land to me but due to his age 97 it is unlikely that he will survive the 7 years to claim gift relief
Submitted: 11 months ago.
Category: UK Tax
Expert:  Tony Tax replied 11 months ago.
Hi.

Can you give me some more detail please. Do you own and live in the the house which was built on the land in 1992? Is there more land that can be built on?
Customer: replied 11 months ago.

One acre plot of land with agricultural tied still in place. Father obtained planning permission with above restriction in 1998. I paid for and built house and have lived in since built in 1992. No prospect of any more development on site

Expert:  Tony Tax replied 11 months ago.

Thanks.

Can you tell me how the agricultural tie impacts on the land in terms of its use. Have you or your father ever been involved in an agricultural business?

Customer: replied 11 months ago.

Ag tie is not tied to any other land only one acre plot Father was farming as tenant until retirement, purchased land from neighboring farmer early 80s . Recent 2011 valuation of acre plot with planning for one house subject to 30%???, arguable, reduction for ag tie £25000.00

Expert:  Tony Tax replied 11 months ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  Tony Tax replied 11 months ago.
Hi again.

If the land is sold to you at undervalue, the difference between its open market value and what it is sold to you for will be assessed on your father as a capital gain and it will also be a potentially exempt transfer for Inheritance Tax purposes, the implications of which should your father not live for seven years you seem to be aware of.

There is a relief called Agricultural Property Relief which you can read about here. This can reduce or eliminate a liability to Inheritance Tax but it only applies to the agricultural value of the land so any value attributable to planning permission would be excluded. I'm not aware of the full circumstances as to the use of the land since your father retired so you would be well advised to seek details advise from an accountant or tax adviser well versed in this area.

If it can be claimed that the gift was of a business asset, it may be possible for part or all of any gain to be held over until a subsequent disposal by you. You can read about this is the HMRC helpsheet HS295. From what you have told me this is probably a long shot.

I hope this helps but let me know if you have any further questions.
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 14153
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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