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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Private residence relief: gains: deemed disposals

Below is a list of disposals or deemed disposals which may give rise to the receipt of a capital sum and so may also give rise to a gain. In each example private residence relief may be due providing that the conditions set out in this chapter are met.

  • The grant of a lease or sublease, see CG70770
  • The assignment of a lease, see CG71100+
  • The surrender of a lease to the landlord, see CG71230+
  • The surrender of rights of occupation by a tenant
  • The grant of an easement, see CG12945
  • The release of a restrictive covenant over neighbouring land, see CG12952 and the example below
  • Compensation or insurance monies for the destruction of the residence, see CG15740+
  • The surrender of an interest in a co-ownership housing association
  • Compensation or damages as a result of a cause of action, ESC/D33, paragraph 10


An individual’s residence benefits from a restrictive covenant which prevents the development of neighbouring land. If he agrees to release the covenant in exchange for a capital sum, relief will be due. This is because, although the covenant is over the neighbouring land, it was held by the individual as a result of his ownership of his residence. Therefore the covenant is an interest in that residence and as such the capital sum is derived from an interest in the residence.