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HMRC internal manual

Capital Gains Manual

Private residence relief: the entity of the dwelling house: decided cases

There have been a series of cases on the question of the entity of the dwelling house.

In Batey v Wakefield (55TC550) it was established that a dwelling house can consist of more than one building and can include an ancillary building which is itself a dwelling house.

The subsequent cases of Markey v Sanders (60TC245) and Williams v Merrylees (60TC297) produced conflicting decisions on apparently similar facts concerning ancillary dwelling houses. The judgements differed in the importance attached to the proximity of the ancillary dwelling house to the main house.

The Court of Appeal decision in Lewis v Rook (64TC567) came at the end of this series of cases and resolved the conflict by laying down the principles by which we are now guided. In giving his decision in Lewis v Rook, Balcombe LJ agreed with Vinelott J’s comment in William v Merrylees in which he said,

“What one is looking for is an entity which can be sensibly described as being a dwelling house though split up into different buildings performing different functions.”

The principles laid down resolved the conflicts in the preceding cases by setting a clear test for identifying the entity making up the dwelling house. This is that no building can form part of a dwelling house which includes a main house, unless that building is appurtenant to and within the curtilage of the main house. The application of this test is explained at CG64260.