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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Private residence relief: the entity of the dwelling house: part of the building let

In SP14/80 which was issued on 14 November 1980, the Board of Inland Revenue clarified the position where the owner of a dwelling house lets part of it as residential accommodation.

The statement of practice says that where the owner of a dwelling house lets a room to a lodger and that lodger lives as a member of the owner’s family, sharing the accommodation and meals with the family, no part of the dwelling house will be treated as having ceased to be occupied as the owner’s residence and therefore private residence relief will not be restricted.

It goes on to say that where the owner of a dwelling house lets part of the dwelling house as a flat or a set of rooms without any structural alterations being made to the property it will be accepted that the part let was part of the owner’s dwelling house. However in these circumstances private residence relief will be restricted in respect of the part that was let as it had ceased to be occupied as the owner’s residence. Although a separate lettings relief under TCGA92/S223 (4) may be available, see CG64230+.

However if the owner of the dwelling house lets part of the dwelling house as a self contained flat which for example is accessed separately to the main house, the self contained flat will itself be treated as a separate dwelling house.

Therefore where part of a dwelling house has been let it is important to establish to what extent the accommodation has been let as this may affect the amount of private residence relief and/or lettings relief due.