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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Private residence relief: letting: gain arising by reason of letting

The gain relieved by TCGA92/S223 (4) is limited to only the gain arising by reason of the letting. In a simple case in which a dwelling house has only been used either as the owner’s only or main residence, or has been let as residential accommodation, it may be accepted that the gain remaining after private residence relief is the gain arising by reason of the letting. That gain may be relieved to the extent of the limits set out in CG64710. There are examples in CG64737.

However the chargeable gain which remains after private residence relief has been allowed may not arise only by reason of the letting. For example, there may have been a part of the dwelling house used exclusively for the purpose of a trade, see CG64660+. If so TCGA92/S223(4) can only relieve the part of the gain remaining after private residence relief has been given which relates to the letting. The example at CG64739 below illustrates how this part can be computed.