Valuation of Land for CGT - tricky

rampantbunny

Hi -

my father and Aunt co-own some agricultural land.
I would like to build a home in near future on this land.

My father can grant me a 'gift' of up to €496,824
My Aunt can bestow a gift to me of €49,682 (see http://www.accountingnet.ie/channels/taxation/inheritance_tax.php)
So if I get 1acre to build a property on then half will be free from CGT (my fathers half) and the remaining half will be taxed if its worth exceeds the threshold of €49,682. This will be my Aunts CGT obligation.

Questions -
Land with planning permission is obviously more expensive than straightforward agricultural land so:
How do I calculate the value of the piece of land?
i.e. Do I get it valued as a piece of agricultural land hence keeping the cost down for CGT purposes? (there is no planning on the piece of land so it is still only agri land)

Or will the revenue consider the land to have development potential and subsequently the CGT on my Aunts behalf is much higher?

I think it's self-assessment so it might be down to me - i just don't want to see the revenue try to 'claw back' some more tax further down the line.

I ask because I have rang the revenue office in my county and between last month and this month I have had 2 totally different answers as to how i should proceed..

bakerbhoy

I was gifted my site by my dad, (1 acre).So no cgt applied,but stamp duty rates do on transfer.
Because the co council imposed a condition of residency for seven years the valuer was able to value it down for stamp duty purposes to €40000.
As for the mortgage company he was able to value it €180000 because they would be able to sell if i defaulted .

Victor

You need to get professional advice on this. It might be possible for you father and aunt to apportion the land so they each own 100% of part of the land and you then get your site from your father.

The_Conductor

Small parcels of land of less than a certain size (not sure the size) regardless of their designation, are treated as residential rather than agricultural land for the purposes of calculation of CGT. Your father can gift you his portion of the acre free of CGT considerations- as a parent can gift a child an acre of land valued at under €254,000 (totally aside from inheritance or other considerations) on a one off basis. S.

rampantbunny

Thanks for the replies.

Bakerbhoy - so you're saying that even if I get half from father stamp duty still applies. This is a consideration I wasn't aware off.
What exactly do you mean when you say "co council imposed a condition of residency for seven years " - does this mean that because the council stipulated you live on the land for 7years it meant that your stamp duty was reduced? i.e. if it was for only 3years then stamp duty would be higher because of the risk that you'd build a house then sell it on?

Victor - I hear you. Yes, pro advice is def. needed. My brother just got a bill of €850 from some pros's when asking their advice. They never mentioned any difference between a site and a piece of land with no planning permission attached. The right questions were prob not asked. Hopefully I'll learn enough on this forum to know what to query them on (although for 850 I thought they'd be telling him how best to proceed)..
The 'pros' determined that it was much more expensive to transfer the land wholly into my fathers name and then he inturn transfer it to us. He would be liable for tax and then he also has to hold onto the land for a nu,ber of years which is not ideal...


Smccarrick - if I'm understanding you correctly, depending on size, if the parcel of land is transferred as agricultural land it may not matter as it could be deemed residential. If this is the case then obviously the CGT will be higher.
I thought this was all self assessed? Does this mean that after submitting the self assessment it could be rejected, as in someone might well say.. 1acre of land is not worth €1000, but €5000, therefore your CGT payment is too low?

The_Conductor

Just a suggestion- Your aunt can gift land valued at €49,682 to your father (a single one off gift, or multiple gifts to that limit over her lifetime), your father can then gift you the whole acre (providing its valued at under €254k, without touching the "gift" provisions of the tax code to a child). You in turn could make a "one-off gift" of up to €24,841 to your aunt, in cognisance of her original share in the property. There are two seperate property transactions- requiring the property in whole to be registered with your father prior to it being gifted to you, and no tax implications for the three of you- but you would all be obliged to report the various transactions in annual tax returns for the year in which the transactions occurred. Its a bit of a merry-go-round, but it is all above board.

Of course- you should get professional advice on this........

The_Conductor

rampantbunny wrote:

Smccarrick - if I'm understanding you correctly, depending on size, if the parcel of land is transferred as agricultural land it may not matter as it could be deemed residential. If this is the case then obviously the CGT will be higher.
I thought this was all self assessed? Does this mean that after submitting the self assessment it could be rejected, as in someone might well say.. 1acre of land is not worth €1000, but €5000, therefore your CGT payment is too low?

Yes- if the land is below a certain size it is no longer considered "agricultural" and could potentially attract punitive CGT, depending on the manner in which the property transaction occurred. Of course you could always explore the manner of structuring the transaction- I firmly believe you could legally get away without any tax implications whatsoever.

Victor

rampantbunny wrote: »

What exactly do you mean when you say "co council imposed a condition of residency for seven years " - does this mean that because the council stipulated you live on the land for 7years it meant that your stamp duty was reduced? i.e. if it was for only 3years then stamp duty would be higher because of the risk that you'd build a house then sell it on?

Councils want to keep commuters in towns and vilalges, wehre services can be provided and out of rural areas. Exceptions are made for close family, agricultural workers, etc. To enforce this, they insist that the planning permission applicant resides there for 5 / 7 years or rather that the house isn't sold to a third party.

This means that the site might be worth €100,000 to a close family member, but only €50,000 to a stranger.

The_Conductor

This may be of interest to you:

http://www.revenue.ie/index.htm?/revguide/capitalacquisitionstax.htm

rampantbunny

smccarrick wrote: »

Just a suggestion- Your aunt can gift land valued at €49,682 to your father (a single one off gift, or multiple gifts to that limit over her lifetime), your father can then gift you the whole acre (providing its valued at under €254k, without touching the "gift" provisions of the tax code to a child). You in turn could make a "one-off gift" of up to €24,841 to your aunt, in cognisance of her original share in the property. There are two seperate property transactions- requiring the property in whole to be registered with your father prior to it being gifted to you, and no tax implications for the three of you- but you would all be obliged to report the various transactions in annual tax returns for the year in which the transactions occurred. Its a bit of a merry-go-round, but it is all above board.

An interesting proposal smmccarick - let me try to make sense of this:

Ok - so we have €49,682 to work with.
Lets say 3 sites are required of 1acre each.
In theory my Aunt could 'gift' my father 3 acres without needing to consider CGT implications if the value is below €49,682?
The land is just land, no sites, therefore no sudden hike in value.

My father could then in turn gift each of 3 children 1acre each - again without tax consideration provided the 1acre is not above the €254k limit?
Even if these smaller parcels are now considered residential it still prob wouldn't matter as they're not likely to exceed the above threshold.

But I think there is a problem - won't my father have to hold on to the land for a certain number of years before he gifts it on?
Thus this approach is only good if children aren't planning on building in the near future...

And I also think that even my aunt passing on 3acres to my father still doesn't take her out of the equation. When it comes time for my father to gift the land to me my aunt will still be considered a part owner because she has not transferred all her holdings to my father i.e. she will still own a fraction of the parcel passed on to me therefore possibly still liable for CGT..

Wow - this is wrecking my head..

The_Conductor

Your aunt can grant a "gift" valued at €49,682 to your dad- this could comprise of literally anything- including the half share in the current acre under negotiation. Alternatively she could gift her share in the property directly to you (as a nephew the limit on a gift from your aunt would be a lower 24,841). Its less messy if she gifts it to your Dad though- from a land registry point of view as much as anything else. The 3 x 1 acres for your siblings are in exactly the same position. Keep in mind- there is no guarantee that planning permission would be granted if you or your siblings chose to sell the property on to a third party (councils are doing their best to discourage 1 off housing by strangers in the countryside).

You do have options available to you- that do not necessarily incur a tax liability on any party involved- you do need to seek professional advice on this- I am *not* involved in conveyancing and do not know the ins and outs of the situation.

S.

rampantbunny

smmcarrick - thanks for your comments.

I do find them helpful. I will indeed seek pro advice.
Because of this thread I will at least be able to approach someone and I armed with the correct questions.

Once again, thanks.

When I do find the best solution I will post back to this thread so that others can benefit.