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HMRC internal manual

Capital Gains Manual

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Private residence relief: letting: meaning of let as residential accommodation

The meaning of ‘let as residential accommodation’ was considered by the Court of Appeal in Owen v Elliott (63TC319), see CG64723. From the decision in that case it is clear that it is not necessary for the occupiers of the let accommodation to make that accommodation their home. Residential accommodation may include rooms in a hotel or guest-house, let as part of a trade, where the owner lives on the premises. It is not necessary for the occupier to have a lease for accommodation to be let. The temporary licence granted by a hotel or guest-house proprietor is sufficient.

There is no statutory definition of the word ‘let’ therefore it must take its everyday normal meaning. The definition provided by the Oxford English Dictionary is,

“To grant the temporary possession and use of in consideration of rent or hire.”

As such in order for relief to be available under TCGA92/S223 (4) there must be some form of ‘rent or hire’.

This interpretation is supported by Leggatt LJ in the Court of Appeal judgement in Owen v Elliott in which he said,

“No relevant distinction can be drawn between a letting to an undergraduate nurse or lodger, such as the judge thought would be entitled to relief, and a letting to anyone else. All are lettings of residential accommodation indistinguishable from that which is provided by boarding or guest houses or indeed by hotels, and all are conducted on what the judge called ‘a commercial basis’.”

It is clear from this that the judge considered that for the purpose of lettings relief letting must be conducted on a commercial basis.

The definition of ‘let’ does not however require that ‘rent or hire’ must necessarily be in the form of money; it may be accepted that ‘rent or hire’ was paid in money’s worth. Therefore if there was a genuine agreement to provide substantial services in return for the provision of the accommodation then this may be sufficient for relief to be available under TCGA92/S223 (4). However care should be taken to distinguish between situations where the agreement represents a genuine commercial arrangement where an appropriate level of money’s worth for the accommodation is provided and situations where some other informal arrangement exists and there happens to be an incidental provision of minor services or where the occupant simply meets expenditure one would normally expect the occupant to pay. Relief is not available where the arrangement is not made on a commercial basis.