Selling & gifting sites on farms

With the number of sites for sale at the minute, I wanted to write a short piece on the issues specific to building sites achieved on farms, the way to ensure planning is retained, the legal pit falls when selling a site and in this article the financial problems when either selling a site from the farm or gifting a site to a friend or relative. This article has been aided by the specialist knowledge of Irwin, Donaghy & Stockman Accountants.

Site prices have taken a significant hit due to the economic downturn; however, rural sites in Northern Ireland are fetching from £40,000.00 upwards with the exceptional sites still achieving close to the eye watering prices at the height of the boom. The price of sites combined with the recent changes in legislation making sites easier to achieve in planning, mean that building sites are a significant financial asset for farmers and should be handled in a professional manner to achieve the greatest return.

Sites sold from a farm are subject to Capital Gains Tax, the Capital Gain is calculated as the difference between the sale proceeds, net of legal fees and agent fees, and cost of acquisition. If the land was inherited rather than purchased, probate value will be substituted for the cost of acquisition, essentially this means the cost of the piece of land at the time of the inheritance. If the land was acquired by the vendor pre March 1982, the March 1982 valuation replaces the cost at the time of acquisition in the calculation of the gain.

The rate of tax payable on the gain is determined by the tax year in which the site is sold. The date for the sale is the date of contract not the date of completion. The rate of Capital Gains Tax is currently dependent upon an individual’s total taxable income from self-employment, employment and investment income in the tax year. For sites sold before 22 June 2010, the rate was 18%; however, for sites sold after this dates the situation is a little more complicated but it is safe to assume that for most sites this rate will be 28% although this should be confirmed by an accountant with experience in this field.

Each individual has an annual tax exemption currently £10,100. Reliefs may also be available to enable the farmer to defer the capital gain, again, an experienced accountant working in this field will be able to advise on these issues.

Sites gifted to a family member,

A site which is given to a family member, except a spouse, is deemed a disposal at market value and subject to Capital Gains Tax even though the farmer may not receive any proceeds from the gifted site. With a gifted site the same tax calculation is prepared as sites sold to an unconnected 3rd party. As with sites sold to an unrelated third party there are potential tax reliefs and the issues should always be discussed with an experienced accountant.