Private Residence Relief and Large Gardens. What are the rules?

Private Residence Relief and Large Gardens. What are the rules?

You normally have to pay “Capital Gains Tax (CGT)” on any gain (increase in value) you make if you dispose of a house or a flat but you are generally entitled to full relief from the CGT if the dwelling house has been your “main residence” and various other conditions have been met throughout your period of ownership.  

One of the conditions is that “the garden or grounds including the buildings on them are not greater than the permitted area.”

To put it very simply, if the garden and grounds at your property are less than 0.5 hectares (1.23 acres) “the permitted area” you will most likely be entitled to the relief. If the garden and grounds are larger than the permitted area then you are less likely to be entitled to relief for it all. 

That said, following a recent legal case it is now possible for large gardens (over 0.5 hectares) to be included in the permitted area.  However, it needs to be required for the “reasonable enjoyment” of the dwelling house and proportionate to its size and character.

Henry Adams are frequently instructed by individuals, Tax Advisers, and Solicitors to provide valuation advice, apportioning values and splitting the gain between the permitted and the chargeable areas.

We can make an assessment as to whether an enlarged permitted area is justified. 

In these situations, we recommend a “Red Book” Valuation which complies with the strictest RICS standards, details how the valuation figure was calculated and puts you in a much stronger position should the valuation be queried by HMRC .

Henry Adams have a team of Chartered Surveyors and RICS Registered Valuers based in Chichester that work closely with our network of offices across Sussex, Surrey and Hampshire to provide unrivalled professional advice based on sound local knowledge. Please do not hesitate to get in touch with Henry Adams on 01243 215840 should you wish to discuss any aspect of the above or if you would like us to provide a fee quote for a Red Book Valuation.