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HMRC internal manual

Capital Gains Manual

Private residence relief: garden and grounds: date of sale test: Varty v Lynes

TCGA92/S222 (1) (b) is written solely in the present tense, referring to land which the owner “has for his own occupation and enjoyment”. We conclude from this that the tests laid down in that subsection are only to be considered on the date on which the land was disposed of.

This conclusion is strengthened further by comparing the wording of subsection (1)(b) with that of subsection (1)(a) which refers to a dwelling house which, “is, or has at any time” been the individual’s only or main residence during their period of ownership. So it is clear that subsection (1)(a) explicitly requires that you look at the use of the dwelling house over time, but subsection (1)(b) asks you to only look at the use of the land on one date.

This interpretation of the legislation was confirmed in the case of Varty v Lynes (51TC419). Mr Lynes disposed of a dwelling house whilst retaining part of the garden, which he disposed of at a later date. The High Court held that no relief was due in respect of the later disposal because the tests of S222 (1) (b) were to be applied at the date of disposal of the retained land, and at that date it was no longer land which Mr Lynes held with his residence as its garden or grounds.

Therefore in order to qualify for relief, land must be held together with the residence on the date of disposal. So land which is disposed of separately before the disposal of the dwelling house may qualify for relief if the other conditions are fulfilled. However land which is disposed of separately after the disposal of the residence cannot qualify for relief.