Home developments
Your main home is exempt from capital gains tax when you sell it, but if you develop the property how far does that exemption stretch?
If you are fortunate enough to have a large garden, you may be tempted to sell off part of the grounds for 'in-fill development'. Where your total garden area is less than half a hectare, the gain on the land sale should be covered by the exemption for your main home. However, you must do things in the right order:
- Sell the extra land before you sell your main home.
- Exchange contracts for sale before you let the developers start any work on the new buildings.
Mrs Dickinson was nearly tripped up by condition 2 when she sold off her tennis courts for housing. She escaped a tax charge by arguing that the land was still in fact part of her garden, even though the builders had dug a few holes at the date of exchange.
Paul Gibson went much further in knocking down his whole home and constructing a new one on the same site, which he sold shortly after it was completed. Although he intended to live in the new property, he was forced to sell it to repay the loans he had taken out. He claimed to have occupied the finished house for about five months before the sale, but he couldn’t prove this with any documents.
If you are planning a 'grand design' conversion for your own home, talk to us first about the tax implications.
