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Rural property owners are being urged to seek expert advice when selling their primary home to avoid potential financial penalties.

Experts at leading property consultancy Fisher German have warned that many rural property owners are unaware that Capital Gains Tax (CGT) may apply when selling their primary homes, and not paying this could lead to financial penalties from HMRC.

CGT is a tax payable on the profit made after a sale or disposal of an asset that has increased in value. Reliefs are available in respect of primary homes, or Principal Private Residence (PPR), however CGT is payable on the increase in value for any part of the property which does not qualify as ‘permitted area’ within this.

For a house to qualify as a PPR, it must be the one house that has been lived in as the primary home throughout the period of ownership, there must not be any commercial lettings of grounds or buildings and the PPR must not be used as a business or for business purposes.

Associate Director, Hannah Rose, said that the main criteria that many are unaware of is that the house, grounds and outbuildings must be less than 0.5 hectare, or around 1.23 acres, unless an area exceeding this can be shown that it is ‘required for the reasonable enjoyment of the property’.

Hannah said: “The general perception is that a principle residence is free from Capital Gains Tax, but this isn’t always the case. Lots of rural properties comprise gardens and grounds larger than 1.23 acres which are not automatically exempt from tax. It’s something that a lot of people aren’t actually aware of, and not paying the tax could result in financial penalties down the line. Anyone looking to sell their primary home should always seek expert advice from a valuer so they are fully aware of what falls within the criteria.

“Seeking advice can also maximise the chances of gaining CGT relief through consideration of the extent of the gardens and grounds which could be regarded as ‘required for the reasonable enjoyment of the property’. From this, valuations of the permitted area and non-permitted area can be used to calculate the level of gain, and the CGT payable.

“Any PPR relief submissions are open to question by HMRC, so a professional, reasoned and effective valuation can help reduce challenges or negotiations with HMRC and their valuers, the Valuation Office Agency. CGT is now payable within 30 days of completion of a sale, so anyone considering the sale of their principle home which has grounds that could exceed 1.23 acres should contact a valuer at the earliest opportunity for advice.”

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