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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Private residence relief: purpose of realising gain: trade

The words of TCGA92/S224 (3) echo the tests applied in determining whether a transaction amounts to a trade or a venture in the nature of trade. You should consider the possibility of assessing as trading income before attempting to invoke Section 224(3) to deny or limit private residence relief.

It may often be appropriate to present as alternatives that a person was trading or that Section 224(3) applies. The Tribunal may be persuaded that, even if a transaction of purchase and sale of a dwelling house does not amount to a venture in the nature of trade, the purchase was made partly for the purpose of realising a gain from the disposal of the dwelling house.

Similarly, you should consider whether any subsequent expenditure with which you are concerned has been incurred as part of a venture in the nature of trade before considering whether the second part of Section 224(3) can be applied.