Replies to Queries

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Replies to Queries — 3

Property conversion

Mr A is a professional, providing services from offices for which he has now obtained planning permission to convert into a flat. If he sells the property now, presumably he will be charged to capital gains tax in the normal way, with the possibility of obtaining rollover relief if he reinvests the proceeds within the time limits. Does the fact that planning permission has been obtained, and hence increases the value, change this in any way?

Would this position change if he converts the property himself and then sells it as a flat? As a one-off transaction, would he lose the benefits of taper relief, etc. and be subject to income tax on the gain as a trade?

If this is the case, should he sell the property to his wife (or is this a waste of time as no gain/no loss provisions apply), children or a trust before the conversion to avoid this problem? They would then convert and sell at a later date. Can stamp duty be avoided on the first sale or do readers think there is no problem?

Alternatively, what is the advice if the property is converted and let out rather than sold?

(Query T16,482)

Issue: 3976 / Categories: