CGT minimisation on land sale

[sackofspuds]

I own a plot of land - discussed in this thread 3 years ago:
viewtopic.php?f=2&t=16161#p200300

The land is in my sole name now. Furthermore, it seems very likely that I'd get planning permission on it.

I'd like to minimise capital gains on it, should I get planning permission.

I'm a higher rate tax payer. My wife and my two adult daughters (in their 20s) are basic rate tax payers. One daughter is a full time student with a part time job, the other works full time.

What i'm thinking is to get a professional valuation of the land and then transfer it into all 4 of our names. I expect the current valuation to be around £16k. That's based on an identically sized plot next door selling for £16k in July 2020. That plot got planning permission and there are now 2 bungalows on it, soon to be 3. Neither of the 2 completed ones have sold yet so don't have a firm valuation there.

Presuming planning permission for two bungalows could be granted, I'd imagine they'd sell for around £400k each therefore £800k total. Not too sure what that would make my plot with planning permission worth but I'm thinking in the region of £200k. Grateful for any opinion on that.

The way I figure it, by dividing the ownership in quarters post valuation and prior to applying for planning permission, we could each make use of our Capital Gains allowance of £6k when we sold with planning permission (this isn't going to happen before the 2023/4 tax year so £6k is the allowance). Of course, it needs to happen before 2024/5 tax year because the Capital Gains allowance halves to £3k.

I worked it all out and a 4 way split, even with me paying higher rate tax, means collectively we will pay about £61k tax which is about £6k less tax than a 3 way split excluding me. I didn't work out a 2 way split between my daughters because I'd like my wife or me to retain some control over the process. My daughters can be rather impetuous. Also, it will be my wife and I paying for the architect, instructing the sales agent, etc so it makes sense to me that at least one of us owns a share of the land.

As an aside, my daughters don't own any property but of course would like to. i guess we could have one house built for each of them next door to each other or they could share one house but neither of them would want to live where the plot is, so that's out.

In any case, I really don't think there's any chance of developing the land ourselves; zero expertise in that area. We'd get planning permission then sell. My daughters would then have funds for a deposit on a house somewhere else.

I guess my question after this very long post is whether this all makes sense? Is it possible to put 4 people on the title? Is there some reason why dividing up the ownership is a bad idea (might HMRC view it in a poor light for example)?

One thing I've thought of while writing this is that my daughter who's a student might have her student loan affected and the one who is working has a student loan to repay and would pay 9% extra on most of her share. Still, at the end of the day they will still be better off than they are now.

An idea I toyed with was transferring the land to a limited company with us as shareholders. The company would presumably pay corporation tax on the profit of what, 25% and then distribute its cash as dividends to us over several years. All seemed too complicated though and seems pretty much an obvious scheme to pay less tax (the company would not be doing any trading activities after all) and therefore I'd worry about HMRC.

[sackofspuds]

Before anyone replies I realise I have misunderstood CGT. I realise now that it is charged at 10% or 20% on land depending if you're a basic or higher rate tax payer.

I was treating the sale proceeds as liable for income tax but I don't think that's the case.

[sackofspuds]

Presuming I got it all wrong first time and it is just a case of paying CGT at 10% or 20% my thinking is that it might not be worth dividing up the land between us.

Reading this:
https://www.gov.uk/capital-gains-tax/rates
It seems that even if you're a basic rate tax payer, if the gain is enough to push you into higher rate tax then you pay the 20% rate. For my wife and working daughter it almost certainly would, in which case the only benefit of dividing things up would be the CGT allowance.

I guess another benefit would be that it would provide my children with a lump sum for a house deposit without my wife and I having to gift it to them (presumably tax implications there).

I'm wondering if I may as well just keep it in my sole name and pay the 20%. Seems simplest.

[Dod101]

Presuming I got it all wrong first time and it is just a case of paying CGT at 10% or 20% my thinking is that it might not be worth dividing up the land between us.

Reading this:
https://www.gov.uk/capital-gains-tax/rates
It seems that even if you're a basic rate tax payer, if the gain is enough to push you into higher rate tax then you pay the 20% rate. For my wife and working daughter it almost certainly would, in which case the only benefit of dividing things up would be the CGT allowance.

I guess another benefit would be that it would provide my children with a lump sum for a house deposit without my wife and I having to gift it to them (presumably tax implications there).

I'm wondering if I may as well just keep it in my sole name and pay the 20%. Seems simplest.

Thinking aloud is usually quite helpful and it seems you are coming to a conclusion.

Dod

[sackofspuds]

Thinking aloud is usually quite helpful and it seems you are coming to a conclusion.

Dod

Indeed. I also see that for gifting my kids cash it's generally ok so long as I don't die for 7 years. Never say never but statistically I have very good odds of living to 66.

I don't object too much to 20% tax versus 10%. It's when it gets to 40% plus that I resent it.

[SebsCat]

What i'm thinking is to get a professional valuation of the land and then transfer it into all 4 of our names. I expect the current valuation to be around £16k. That's based on an identically sized plot next door selling for £16k in July 2020. That plot got planning permission and there are now 2 bungalows on it, soon to be 3. Neither of the 2 completed ones have sold yet so don't have a firm valuation there.

When the previous plot of land sold there was presumably either little expectation that planning permission would ever be obtained or else that there was an overage clause (where some of the uplift following planning permission would be paid to the vendor). Either way, if there is a reasonable expectation that planning permission would be granted for your plot then a current fair market valuation would be considerably higher than £16k.

[sackofspuds]

if there is a reasonable expectation that planning permission would be granted for your plot then a current fair market valuation would be considerably higher than £16k.

Good point. I came across a "toolkit" written on behalf of, I think, HMRC to valuers stating that development potential was the top thing that valuers needed to take account of:
https://assets.publishing.service.gov.u ... evised.pdf