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HMRC internal manual

Capital Gains Manual

Private residence relief: example: disposal of garden/grounds within permitted area: part-disposal

G acquired a house with gardens of one hectare in May 2003 for £120,000. It was used as his residence throughout his period of ownership but was only his main residence from June 2006 to July 2009. In January 2014 he sold a piece of land of 0.3 hectares for £50,000 and submitted a computation of the gain on the part-disposal basis. The Valuation Office Agency agreed that all of the land sold was within the permitted area and agreed that the value of the retained property was £280,000.

The gain is as follows.

                          Disposal proceeds                                                                                            £50,000

less                   Cost                                           £50,000                     x £120,000             (£18,182)

                                                                   £50,000 + £280,000

                               Gain                                                                                                                    £31,818


Private residence relief

  • Period of ownership May 2003 to January 2014 =129 month
  • Period of only or main residence

June 2006 - July 2009 = 38 months

  • Final period allowed by TCGA92/S223(2) = 36 months

The relief is 38 + 36 x £31,818 = £18,252


The chargeable gain will be £13,566 before annual exempt amount.

If the dwelling house had always been his only or main residence the gain would have been wholly relieved and a computation would only be needed to establish how much of the cost of the property should be apportioned to this disposal.

If the land lay wholly outside the permitted area the whole of the gain of £31,818 would be a chargeable gain regardless of the use made of the dwelling house.

If the land had been disposed of on or after 6 April 2014 the final period exemption would be limited to 18 months see CG64985.