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HMRC internal manual

Capital Gains Manual

Private residence relief: purpose of realising gain: introduction

TCGA92/S224 (3)

The purpose of private residence relief is to relieve gains arising on the disposal of an individual’s residence so that the whole of the disposal proceeds are available to be used to buy a new residence of a similar standard. It is not intended to relieve speculative gains or gains arising from development.

The exclusion of speculative or development gains is achieved by TCGA92/S224 (3). It is important to understand the scope and limitations of this subsection so that you can apply it in suitable cases.

The subsection applies

  • where a dwelling house is acquired wholly or partly for the purpose of realising a gain from its disposal, or
  • where there is subsequent expenditure on the dwelling house wholly or partly for the purpose of realising a gain from its disposal.

Where the first part of the subsection applies no relief is due on any gain accruing from the disposal of the dwelling house. Where the second part of the subsection applies no relief is due on any part of the gain attributable to the expenditure.

The guidance below describes the circumstances in which the subsection can be used, and when it cannot. They also explain what is meant by `acquired for the purpose of realising a gain’, see CG65210+. Before applying TCGA92/S224 (3) you should always consider the possibility that the taxpayer has undertaken an adventure in the nature of trade, see CG65214+.