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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Private residence relief: example: sale of dwelling house: land exceeds permitted area

This example illustrates the apportionments which are required when a dwelling house is sold with garden or grounds which exceed the permitted area, see CG64800+. In small and straightforward cases this approach may be simplified and examples of two simpler methods of apportionment are given at CG65117 and CG65118.

C owned a dwelling house, which has always been his only or main residence, together with 5 hectares of land which has always been the garden or grounds of that residence. The property cost £250,000 in May 2004 and he sold it for £500,000 in March 2014.

The First Tier Tribunal determined that the permitted area in March 2014 was two hectares. The Valuation Office Agency has agreed the following apportionments:-

  2004 2014
Dwelling house and permitted area 200,000 410,000
Remainder 50,000 90,000
  250,000 500,000

The gain on the dwelling house and permitted area is wholly relieved so no computation is needed. The gain on the remaining land is computed as follows.

  Disposal proceeds 90,000
less cost 50,000
  GAIN 40,000