Tax Question of the Week 2


My client has a question about principal private residence relief. She resides in a property that has grounds attached to it which exceed half a hectare. Within the grounds of the residence, there is an outbuilding which in the recent past had been lived in by an elderly relative. However, more recently the outbuilding has been let out. My client now wishes to sell their property and the outbuilding. Would Capital Gains Tax be charged on the sale of the outbuilding?


As the normal ‘permitted area’ for private residence relief has been exceeded, it is first necessary to establish whether the grounds were in keeping with the size and location of the residence and whether they were actually enjoyed as part of the main residence.

Secondly, it will be necessary to clarify the detailed history of the outbuilding. If the owners of the main residence could show that they had personally occupied and enjoyed the outbuilding as part of their main residence then they should be able to claim PPR on a time-apportioned basis in respect of the period they actually occupied it and consequently lettings relief would also be available. However, it is not clear that use of the building by an elderly relative would constitute such use. It appears that the outbuilding is a separate dwelling in itself and its use by a relative would not automatically qualify for relief unless the relative had been in occupation of the dwelling prior to 5th April 1988 and had at that time satisfied the conditions for Dependent Relative Relief in respect of either age or infirmity.

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