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HMRC internal manual

Capital Gains Manual

Private residence relief: example: full relief despite business use

A owns a house, which has always been his only residence, together with 0.4 hectares of adjoining land. Part of the land has been used by him as a garden while part has been surfaced and used as a yard for his road haulage business.

In 2011 he retired and arranged for the yard to be dug up and converted into lawns and flower gardens for his house. By 2014 he had realised that the gardens were too large for him to maintain. So he sold 0.2 hectares for residential development, realising a substantial gain.

The gain arising on the disposal of the land is fully relieved. The tests set out in TCGA92/S222 (1)(b) are all fulfilled, see CG64350. At the date of sale the land is occupied and enjoyed as part of the garden of Mr A’s residence and its area does not exceed the limit set out in CG64815. So relief is determined by reference to the test in TCGA92/S223 (1) which depends on the use which has been made of the dwelling house, see CG64350. The dwelling house has been his only residence throughout his period of ownership so full relief is due.