CG65257 - 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.
| Description | 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 |
| Gain | 150,000 | 100,000 | 50,000 |
The chargeable gain is £50,000 subject to annual exempt amount.