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HMRC internal manual

Capital Gains Manual

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Private residence relief: example: disposal partly within permitted area: part-disposal

J acquired a house with 1.5 hectares of garden in August 1998 for £95,000. It was used as his residence throughout his period of ownership and was his main residence from June 2001 to May 2009. In December 2010 he sold a piece of land of 0.6 hectares for £150,000 and submitted a computation of the gain on the part-disposal basis.

Initially the Valuation Office Agency was able to agree with him that

  • 0.4 hectares of the land sold in December 2010 fell within the permitted area
  • £100,000 of the disposal proceeds should be attributed to the 0.4 hectares within the permitted area leaving £50,000 to the remaining 0.2 hectares
  • the value of the retained house with 0.9 hectares is £300,000.

Using the part-disposal formula the value of the property at aquisition apportioned to the land sold is

£95,000 x £150,000 = £31,667

150,000 + 300,000

The Valuation Office Agency was then able to agree an apportionment of the £31,667 as £21,111 to the 0.4 hectares of land within the permitted area and £10,556 to the 0.2 hectares outside.

The gain is computed as follows

    0.4 hectares Remainder
       
    £ £
  Disposal proceeds 100,000 50,000
Less Cost 21,111 10,556
  Gain 78,889 39,444

The gain arising on the 0.2 hectares outside the permitted area is wholly chargeable but some relief is due on the 0.4 hectares which falls within the permitted area.

Private residence relief

  • Period of ownership August 1998 - Dec 2010 = 149 months
  • Period of only or main residence
June 2001 - May 2009 = 95 months
   
Final period allowed by TCGA92/S223 (2) = 36 months

The relief is 95 + 19 x £78,889 = £60,358

                          149

The chargeable gain is £18,531 + £39,444 = £57,975 subject to annual exempt amount.

If the dwelling house had always been his only or main residence the gain arising on the 0.4 hectares of land within the permitted area would have been wholly relieved and a computation in respect of that land would only be 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.