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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
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Roll-over relief: land and buildings: let properties

Where land and buildings are let by the owner upon terms which give the tenant the right to occupy to the exclusion of all others, they are not normally qualifying assets of the owner for the purposes of the owner’s trade.

Exceptions to this rule are:

  • land and buildings let to a partnership by an acting partner, see CG61150+;
  • land and buildings let to an individual’s family or personal company, see CG61250;
  • lessors of tied premises, see CG61010;
  • lessors of furnished premises and caravan sites where the owner provides services in circumstances which amount to trading by the owner, see PIM4300 and leaflet IR150 `Taxation of rents. A guide to property income’;
  • commercial letting of furnished holiday accommodation, see CG61450+.

Where premises are let in circumstances such that the owner remains the legal occupier of the land or buildings, a claim to relief is not prevented solely because there is also occupation by others. Examples of such lettings are:

  • a hotel or guest house (except any part not used exclusively for trade purposes, see CG64660+);
  • licensed premises owned and managed by a brewer, see CG61010;
  • a house let to an employee who is required to occupy those premises (and no other) for the proper or better performance of the duties of the employment, see SE11341+ or EIM11341+.

A farmhouse occupied by the farmer as a private residence is not regarded as a building occupied only for trade purposes except to the extent that any part of it is used exclusively for trade purposes, see CG64680.

A house provided by a company for occupation as the private residence of a director will not normally qualify under Section 155 because occupation of the property (and no other) is unlikely to be essential to the proper or better performance of the duties of the office.

A house provided by a partnership for occupation as the private residence of a partner may qualify under Section 155 if:

  • the terms of the partnership agreement require the particular partner to live in the particular house,

or

  • the occupation of the house by the partner is essential to the trade of the partnership.

In Anderton v Lamb (55TC1) it was held that the tests set out by the House of Lords in Valuation Commissioners NI v Fermanagh PBE (1969) 1WLR1708 could apply to partners. But, on the particular facts, the tests were not satisfied in that case. Whether or not occupation of a particular house is essential to the trade is a question of fact. To fulfil the relevant tests as set out in the judgement on page 7 the claimant has to show either:

  1. that it is essential that the employee lives in that particular house and that this understanding is implicitly or explicitly agreed by employer and employee; or
  2. that while it is not essential that he does occupy that particular property, by doing so he can better perform the duties of his employment and there is an express term in the contract that he does occupy that property.