MPs call for end of 'unfair tax' on landowners

A group of senior MPs has written to the Treasury backing the CLA’s call to reform Capital Gains Tax (CGT) relief on land compulsorily purchased for major UK infrastructure projects like HS2.

The CLA approached several MPs asking for support for its tax reforms to make the compulsory purchase system fairer. Signatories to the letter include the Attorney General Jeremy Wright QC MP and the Minister for Europe David Lidington MP.

Under existing CGT rules if a landowner uses the money received from land bought through compulsory purchase to buy other land they are entitled to relief. If they choose to use the money to pay for replacement building on land they already own they have to pay CGT before making necessary reinvestment.

CLA President Henry Robinson said: “Families affected by compulsory purchase face major worry and uncertainty often over a number of years. The whole system is in urgent need of reform. A good first step would be to allow people flexibility to invest in replacement property without fear of being hit with a large tax bill."

The Prideaux family owns the Doddershall Estate in Buckinghamshire whose gate house lodge is currently let to a tenant which would be demolished to make way for HS2. It would be impossible to rebuild the property on existing land without paying a huge bill for Capital Gains Tax.

Mr Robinson added: “We also want to see an extension to this so the landowner is eligible for the relief for longer and so have a realistic timeframe to plan a sustainable replacement for the land or property lost to compulsory purchase.”

Ivan Banister is an arable farmer from Northamptonshire who could be subjected to compulsory purchase of up to 120 acres of land during the construction of HS2.

Under current tax rules, Mr Banister can only reinvest in the year before he receives compensation and up to three years afterwards. Due to the uncertainty of how much and when his land will be taken, together with the substantial number of other people wanting to do the same thing for the same reason, reinvestment in land that is near enough to him to farm will be all but impossible in the required timescale.

"The current compensation code is outdated and the capital taxation system was never designed to cover such a long-term infrastructure project.

Former Secretary of State for Wales and MP for Chesham and Amersham Cheryl Gillan said: “I, and several of my colleagues fully support the CLA’s reforms to Capital Gains Tax relief. As an MP for a constituency badly affected by HS2, I have seen the trauma experienced by those whose livelihoods are put at risk. All they want is to find a way to continue running their business in a viable way but the current tax rules stop them from doing this.”

Chancellor George Osborne announced in the Autumn Statement last week that the Government would publish proposals to make the compulsory purchase system fairer in the 2015 Budget. The CLA will continue to press the Government for reform of Capital Gains Tax relief to be included in these proposals.