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HMRC internal manual

Capital Gains Manual

Private residence relief: permitted area: case law

The statutory test in TCGA92/S222 (3) was considered in Longson v Baker (73TC415). Dr Longson claimed that land additional to the permitted 0.5 hectares which was used to house and graze his horses was required for the reasonable enjoyment of his dwelling-house. Although the District Valuer agreed that a larger permitted area should be allowed and suggested that 1.054 hectares (2.61 acres) was reasonably required for the enjoyment of the house, Dr Longson contended that all of the land purchased with the property, 7.56 hectares (18.68 acres), was so required, by virtue of the “equestrian character” of the property. He argued that the word “required” meant nothing more than “called for”.

However, both the Special Commissioners and the High Court found against the taxpayer on the basis that the test under s222(3) is an objective test. In his conclusion, the Special Commissioner stated that,

“The statute requires me to look at the dwelling-house and determine that area of land which is “required for the reasonable enjoyment” of the dwelling-house as a residence, having regard to “the size and character of the dwelling-house”. Accordingly I am not permitted to take into account the particular requirements of the owner of the dwelling-house: it is the house to which I must look and not the wishes, desires or intentions of any particular owner of the house.”

And Evans-Lombe J commented in the High Court

“It is clear from the words ‘‘required for the reasonable enjoyment’’ in subs (3), that the test to be applied as to what any larger permitted area can consist of over the 0.5 hectares allowed by the section, is an objective test. In my judgment it is not objectively required, i.e. necessary, to keep horses at a house in order to enjoy it as a residence. An individual taxpayer may subjectively wish to do so but that is not the same thing.”

The District Valuer in Longson v Baker had been guided by the decision in the case of Newhill Compulsory Purchase Order, 1937, Payne’s Application [1938] 2 All ER 163 in which du Parcq J commented on the meaning of the word ‘required’ in his judgement as follows,

“…one has to remember that it is pleasant, and one may say, both an amenity and a convenience to have a good deal of open space around one’s house, but it does not follow that that open space is required for the amenity or the convenience of the house. ‘Required’, I think in this section, does not mean merely that the occupiers of the house would like to have it or that they would miss it if they lost it, or that anyone proposing to buy the house would think less of the house without it than he would if it were preserved to it. ‘Required’ means, I suppose, that without it there will be such a substantial deprivation of amenities or convenience that a real injury will be done to the property owner and a question like that is obviously a question of fact.”

The Special Commissioner in Longson v Baker accepted the evidence of the District Valuer and this was supported by in the High Court by Evans-Lombe J in his judgement, in which he said,

“It seems to me that there is a sufficient analogy between the statutory provisions which du Parcq J was considering in the case which I have just cited and those of s 222(3), that it was entirely legitimate for the commissioner to take guidance from this authority.”