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HMRC internal manual

Capital Gains Manual

Private residence relief: the entity of the dwelling house: urban dwelling houses

In Honour v Norris (64TC599) the High Court considered the application of the Lewis v Rook principle to an urban setting. The case concerned the question of whether two flats could form a single dwelling house. The High Court found that having regard to the particular facts of the case the two flats did not form a single dwelling house, however the judge declined to set out any general guidelines on the question which could be applied to other cases.

The curtilage test cannot be easily applied to a taxpayer who lives in a flat or small urban house because it is likely that the flat or house will have little or no curtilage beyond its walls or small garden.

In many cases the owner of a flat or urban house will own a separate garage which may be outside the curtilage of the dwelling house or be separated from it by land and buildings not owned by the taxpayer. For example many blocks of flats and urban houses have garage blocks nearby for the sole use of the occupants. In such circumstances if the garage is near to the flat or house and is bought and sold with the flat or house it can be considered to be part of the dwelling house.

Occasionally however a garage or lock-up may be located elsewhere and may not be in an appropriate location for use with the flat or house or may have been bought and sold separately. This situation is different to that detailed above where the garage is part of the block of flats, and in these circumstances relief may not be due on the disposal of the garage. However in many cases it is likely that the gain will only be small so it may not be worthwhile initiating enquiries.