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HMRC internal manual

Capital Gains Manual

Private residence relief: example: disposal partly within permitted area: separate asset

H acquired a house with two hectares of garden in June 2000 for £150,000. It was used as her residence throughout her period of ownership and was her main residence from June 2000 to January 2007. In May 2010 she sold a piece of land of one hectare for £100,000 and submitted a computation of the gain on the separate asset basis.

The Valuation Office Agency agreed that

  • 0.2 hectares of the land sold is within the permitted area. The apportionments should be
  2000 2010
0.2 hectares within permitted area £4,000 £20,000
remainder 16,000 80,000
  £20,000 £100,000

The gain is computed as follows:-

    0.2 hectares Remainder
    £ £
  Disposal proceeds 20,000 80,000
Less Cost 4,000 16,000
  Gain 16,000 64,000

The gain arising on the 0.8 hectares outside the permitted area is wholly chargeable but some relief is due on the 0.2 hectares within the permitted area.

Private Residence Relief

  • Period of ownership June 2000 to May 2010 = 120 months
  • Period of only or main residence

June 2000 - January 2007 = 80 months

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

The relief is 80 + 36 x £16,000 = £15,467


The chargeable gain will be £533 + £64,000 = £64,533 before annual exempt amount.

If the dwelling house had always been her only or main residence the gain on the 0.2 hectares of land within the permitted area would have been wholly relieved and a computation in respect of that land would only have been needed to establish how much of the cost of the property should be apportioned to this disposal.

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.