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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Private residence relief: non residential use: part of house used exclusively for business

TCGA92/S224(1) only excludes from relief any part of the dwelling house which is used exclusively for the purposes of a trade, business, profession or vocation. So a room which is used partly for business purposes and partly for residential purposes will qualify in full for relief.

For example, the kitchen of a small guest-house may be used equally to provide meals for the resident owner and to provide meals for the guests. As the kitchen is not used exclusively by the owner for the purposes of the trade TCGA92/S224(1) cannot be used to restrict relief. Although a proportion of the expense of heating and lighting the kitchen, together with fuel for cooking, may be wholly and exclusively expended for the purposes of the trade and as such be deductible in computing the profits chargeable as income, it does not follow that a similar restriction should be made to the private residence relief.

Where a room has been used exclusively for the purposes of a trade, business, profession or vocation the apportionment required by TCGA92/S224(1) should be made by reference to the facts relating to the dwelling-house. Any private use fraction agreed for the purposes of computing profits chargeable as income provides a poor guide to the apportionment required by TCGA92/S224(1) and should only be used if no other evidence is available.

The exclusive use test is a stringent one and you should not usually seek any restriction to relief for a room which has some measure of regular residential use. But occasional and very minor residential use should be disregarded. For example, if a doctor keeps private possessions in a room used as his or her surgery the surgery should still be regarded as exclusively in business use.