Jennifer Adams considers the tax implications of demolishing a residential property and rebuilding from scratch rather than just renovating.
Every building has a life span - usually between 80 and 100 years. Older buildings require a considerable amount of maintenance, and there comes a point when repairs are not always cost-effective.
Sometimes, the most practical option is to demolish and start anew. As always with property, there are tax considerations to take into account.
‘Deemed disposal’
Under land law, demolishing a building (accidentally or deliberately) is not a disposal, as the land on which the building stands remains. However, under tax law the disposal is subject to the capital gains tax (CGT) legislation and creates a 'deemed disposal' separate from the land. The legislation relevant to such an action is in TCGA 1992, s 24)
