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HMRC internal manual

Capital Gains Manual

Private residence relief: letting: residence partly used for trade

A dwelling house is sold at a gain of £400,000 in 2014. It has been lived in by the owner throughout her period of ownership as her only or main residence but she has also used the property as a residential training college which she operates as a trade, charging for lodging and tuition. It is agreed that 60 per cent of the property has been used for teaching, 15 per cent has been used as the students lodgings and 25 per cent has been used as the residence of the owner.

The computation is

net gain     400,000
private residence relief 25%     100,000
relief under TCGA92/S223(4) limited to the lowest of      
  private residence relief 100,000  
  TCGA92/S223(4)(b) 40,000  
  gain arising by reason of the letting (15%) 60,000  
applicable limit     40,000
Chargeable gain     260,000