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TQOTW: S161 TCGA & PPR Relief

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Q. My clients are a married couple who intend to carve a building plot out of the garden of their only and main residence and then build a property on the plot for onward sale. I am satisfied that, ignoring the building activity, a sale of the plot would have qualified in full for Principal Private Residence relief. Once the property is sold, how do I apportion costs and periods of ownership to determine how much of the gain qualifies for PPR relief?

A. It would appear your clients will be carrying on a property development trade so some of the gain will in fact be trading profit. The building plot will be treated as an asset appropriated for the purposes of a trade as trading stock at which point your clients are treated for capital gains tax purposes as though they have made a disposal of land at market value. Normal PPR relief rules will apply to the deemed gain.

For income tax purposes, the property development business is deemed to have acquired the land as stock at its market value.

If you would like to discuss a tax query why not contact the Tax Advice Line on 0844 892 2470? Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.

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Tax Advice Consultant
0844 892 2470

Colin began to specialise in tax in 1983. He has previously spent time as a tax partner with two leading accountancy firms and, more recently, as partner in a specialist tax consultancy business providing planning advice and problem solving for successful owner-managed businesses and their owners across the UK.

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