This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Capital Gains Manual

Private residence relief: non residential use: part of house used for business: apportionment

How much of the total gain accruing on the disposal of a dwelling house is attributable to the residential and how much to the business parts of that dwelling house is a question to be decided on the facts of the particular case.

In a mixed property, such as a public house with residential accommodation above, the business part would be expected to be of greater value than the residential. So an apportionment based solely on the number of rooms or the floor area used for each purpose could produce an excessive amount of relief. In small cases any reasonable apportionment may be accepted. If the tax at stake is material or the apportionment appears to have been unduly weighted in favour of the residential accommodation the Valuation Office Agency should be consulted. Form CG20 should be used and the Valuation Office Agency should be asked to apportion the consideration received, as well as any deductible cost or valuation. The example at CG64674 illustrates the valuations and apportionments needed. The Valuation Office Agency will apportion the consideration in proportion to the value of the respective parts of the property.

You will occasionally see computations based on a valuation of the residential accommodation in isolation as if it were a separate house. That valuation is then deducted from the consideration as a measure of the proportion of the gain which attracts relief. Such an approach is not a proper apportionment and will produce an excessive amount of relief.