CG38662 - Capital payments – making land available – from 6 April 2017

Where land is made available for the use of a person the benefit calculation for the making of land available is covered in S97C TCGA 92 and S742E ITA 07. This applies to capital payments or benefits received in 2017-18 and subsequent tax years. The value of the benefit provided by making land available for the use of an individual for each tax year in which the benefit is provided is calculated as the amount by which-

(a) The rental value of the land for the period of the tax year during which the land is made available to the individual, exceeds

(b) The total of the amounts (if any) paid in the tax year by the individual –

(i) To the person providing the benefit, in respect of the availability of the land, or

(ii) So far as not within sub-paragraph (i), in respect of costs of repair, insurance or maintenance relating to the land.

This calculation does not apply if the person providing the benefit transfers the whole of their interest in the land to the individual.

The rental value of the land referred to above means the rent which would have been payable for the period if the land had been let to the individual at an annual rent equal to the annual value. The annual value of the land is the rent that might reasonably be expected to be obtained on a letting from year to year if the tenant undertook to pay all taxes, rates and charges usually paid by a tenant and the landlord undertook to bear the costs of the repairs and insurance and the other expenditure necessary for maintaining the property in a state to command that rent.

Example

Sarah is the beneficiary of a non-resident trust. The trustees own a residential property in London and in 2019/20 the trustees make the property available for Sarah to live in. In exchange for being allowed to live in the property Sarah agrees to pay for any maintenance work that is needed on the property. The District Valuer states that the annual rent such a property would command would be £25,000 per year.

In 2019/20 Sarah does not have to spend anything on the maintenance of the property and so the value of the benefit provided will be £25,000.

In 2020/21 the property starts to suffer from damp and Sarah spends £5,000 in repairing the property. As a result the value of the benefit is calculated as £20,000 (£25,000 - £5,000).

In 2021/22 an issue is identified with the roof and Sarah pays £30,000 to repair this. As the cost of repairs incurred by Sarah during the year exceeds the value of the annual rent the value of the benefit in 2021/22 will be nil.