HMRC internal manual

Capital Gains Manual

CG64821 - Private residence relief: permitted area: preliminary decisions

You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.

Before the District Valuer can decide on the extent of the permitted area of garden and grounds you must make the following decisions,

  • The extent of the entity of the dwelling house, see CG64230+
  • The extent to which that dwelling house has been used as a residence, see CG64420+
  • The extent of the garden and grounds, see CG64350+.

The Valuation Office Agency may be able to provide the following information which will help you to make your decisions,

  • A description of the property, including the location of outbuildings, staff cottages, etc.
  • A description of the land held with the dwelling house.
  • Details of sales of land which have taken place.

If these decisions are disputed you should not try to resolve them by seeking a decision of the Tribunal. These preliminary matters can, if necessary, be resolved by the Tribunal at the same time that they determine the permitted area if they are required to do this.

You should therefore,

  • Make your decisions on the points above after obtaining whatever information you consider to be necessary
  • Explain your decisions to the taxpayer
  • If the permitted area still needs to be determined, refer the matter to the Valuation Office Agency under CG64862.

The guidance at CG64230+ explains why it is important to correctly identify the entity making up the dwelling house. If the entity is not identified correctly, the District Valuer may determine an inappropriate permitted area.

It is also important to establish how much of the dwelling house has been used as a residence. This is because the permitted area is defined by TCGA92/S222 (3) as the area required for the reasonable enjoyment of the part of the dwelling house which has been used as a residence. This distinction can be important where an individual has a very large dwelling house with extensive grounds but only occupies a small part of the dwelling house as a residence. The extensive grounds required by the dwelling house may be much larger than the area required by the small part of that dwelling house which is actually used as a residence.