Private residence relief: realising gain: acquisition of freehold
In January 2004 an individual acquires a 99 year lease of a dwelling house with 63 years of the lease remaining, at a cost of £60,000. He uses the dwelling house as his only residence. In 2013 he decides to sell the house. To increase its value he acquires the freehold for a payment of £40,000 in February 2013. The house is sold in March 2014 for £250,000. The Valuation Office Agency agrees that if the leasehold interest had been sold in March 2014 it would have fetched £160,000.
The part of the gain which is excluded from relief because of the application of TCGA92/S224 (3) is computed as follows.
|Total Gain||Exempt Gain||Non-exempt gain|
|1) Disposal proceeds||250,000|
|2) Value of leasehold interest||160,000|
|Consideration resulting from|
|acquisition of freehold (1) - (2)||90,000|
|less Cost of leasehold||60,000||60,000|
|less Cost of freehold||40,000||40,000|
The chargeable gain is £50,000 subject to annual exempt amount.