We have recently purchased a pair of semi detached cottages in need of renovation of replacement. We have been advised that it might be possible to obtain planning permission to demolish and rebuild two detached houses on the site. If we obtained planning permission and sold a plot with planning, would we be liable for Capital Gains Tax on the sale? The plot size is likely to be in the region of 0.15-0.2 acre.

If we obtained planning for two detached houses, and built one ourselves, sold it and then built the second one to live in would we be liable for CGT on the sale of the first house?

Or lastly, would we be liable for CGT if we built both houses simultaneously and then sold one / lived in one?

  • Adam

    This might help. http://www.homebuilding.co.uk/community/qa/capital-gains-tax-query

    I think the key bit of advice is; speak to an accountant. It’s better to be armed with the facts than with unqualified advice no matter how well meaning or accurate. Where HMRC are concerned it pays to have a professional adviser on your side!

    Good luck

  • Julia Manley

    The sale of land or property that is not, and never has been, your principal private residence (PPR) will fall within the capital gains tax (CGT) rules, and any gain would be subject to CGT.

    So if you sell off a plot (unless the plot is part of the garden of your PPR – in which case different rules apply) the gain made on the sale of the plot will be subject to CGT.

    If you build two houses and live in one as your PPR you will not be subject to CGT on your PPR but will be on the other house.

    The rules are complicated and there are reliefs available to help minimise tax. but YOU MUST talk to an accountant BEFORE you start this project. It may be best to have one as your PPR, then let it out and move into the other one, and then sell the original one to help minimise the tax but there are time limits so talk to an accountant.

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