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HMRC internal manual

Capital Gains Manual

Private residence relief: permitted area: identifying risks

Where a taxpayer has garden and grounds in excess of the permitted area and they dispose of all or part it, they should enter the details of the disposal on their tax return and provide further details, where appropriate, of why they consider all or part of the gain is relieved from Capital Gains Tax.

However, where a taxpayer has relied on their own opinion that full relief is due, they may fail to mention this in a return. Other information, such as a large sale price, may therefore assist in identifying disposals of residences where part of the gain may not qualify for private residence relief.

Without the benefit of planning permission however, garden land may be of little value. Where a dwelling house and its garden and grounds are disposed of, and the garden and grounds only marginally exceed 0.5 hectares, it may be that the gain accruing on the land outside the permitted area will be small and may not be worth pursuit.