Land use and Diversification

Question 1

What is the current rate of CGT?

Answer 1

28% for Residential property, 20% for anything else

Question 2

Current VAT rate?

Answer 2

20%

Question 3

Income Tax rate?

Answer 3

20% - £12.5k - £50k
40% - £50k - £150k
50% - £150k +

Question 4

SDLT

Answer 4

For residential properties only, currently up to £500k holiday, until 30th June 2021, up to £1m - 5%, up to £1.5m - 10%, over £1.5m - 12%

For non resi - over £150k is at 2%, then £250k plus is 5%

Question 5

When does small business rates relief apply?

Answer 5

Where the properties rateable value is less than £15k PA and the business uses only one property

Question 6

Current rate of IHT?

Answer 6

40%

Nil rate band of £325k, increases to £500k for a property.

Question 7

What is entrprenuers / Business Asset Disposal relief?

Answer 7

This can be used to pay less capital gains tax (10% rather than 20%) and applies to qualifying business assets, must be a trading assett owned by the business.

Especially useful for a furnished holiday let, 10% rather than 28%.

Question 8

What is agricultural land, trading?

Answer 8

Yes trading.

Question 9

What is Gift Holdover Relief?

Answer 9

Gift Holdover Relief is where you delay payment of CGT so that it is not paid when an assett is given but is paid when the person reciving the property sells.

The “base rate” will also be the same for both.

In every case the effect of the relief is to “pass the tax parcel” to the donee. A simple example demonstrates the principle:

You give your daughter a piece of land that is a qualifying asset with a “base cost” of £10,000 and market value of £100,000.

Without the relief, you pay tax on a gain of £90,000 and your daughter’s base cost for a future disposal is £100,000.

With the relief, you are treated as disposing of the land for £10,000, which also becomes your daughter’s “base cost” for a future disposal.