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My client has recently been granted planning permission to build two dwellings on an area that is part of the garden of her main residence. She has owned the house for around 30 years and intends to remain lilving in it for the forseeable future. The area of land has been valued at £150,000. Will any capital gains tax be payable? - Crowther Image

Capital gains principle private residence relief is available not only on the sale of main residence but also on the sale of the garden that attaches to the main residence.

To qualify for relief the land must meet the following conditions on the date its sold:

  • It must be occupied and enjoyed as the garden of the residence. Whether a particular piece of land can be regarded as garden or grounds must be decided on the facts of each particular case.
  • The area of land must not exceed the permitted area. The permitted area includes the site of the residence itself as well as the garden. Capital gains legislation defines this as 0.5 hectares. A larger area of garden may be permitted where the larger area is required for the reasonable enjoyment of the residence, having regard to the size and character of the residence.

As your client has lived in the house during the whole period of her ownership then private residence relief may be available on the disposal of the garden bearing in mind the points above. The legislation makes no reference to how the land is used during the period of ownership. Therefore the use of the land at any date other than the date of disposal is irrelevant. It is crucial therefore that your client continues to use the garden up to the date it is sold and that it is not for example fenced off in any way.

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