Putting our swords down for a moment, I'd be grateful for your thoughts on this one, Paul (and anyone else listening) - it ought to be right up your street!
Property was purchased and occupied as PPR for a number of years. Part of the property was then used for B&B (therefore eligible for letting relief) until sale. Clearly we have to apportion the gain, but the question is by how much? What does s.224(1) mean when it refers to exclusive use - does it mean exclusive at any given point in time or throughout ownership. If we were to strip out the B&B gain it would appear that we would not get last 36 months on that part, as PPR only applies to the remainder.
However, if the whole of the property had been run as B&B, with PPR now elsewhere, we would get last 36 months PPR and so it would seem illogical that such relief woudl be excluded where only part run as B&B (but we know the PPR rules are far from logical!)
My understanding is that s224(2) should apply such that the just and reasonable treatment applies and that it would be just and reasonable to strip out the B&B part, but excluding the last 36 months, ie leaving it in for PPR.
Your thoughts?
David Lochhead
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Why no letting relief?
I seem to recall a case involving a hotel (even less likely to attract letting relief one would have thought) where it was held that the accommodation does not need to be the occupant's home - it just needs to be let as residential accommodation.
For the time being, we have used the apportionment used for Sch D purposes in establishing an apportionment of the gain for CGT. Whether this is just and reasonable is open to debate, but it's a starting point! In any event, I don't think 224(1) is in point here - it is 224(2) that applies - this does not require an apportionment of the gain, rather an adjustment to the 223 relief, which seems quite different.
Reverting to my original post, though, if the whole of the property were usesd as PPR for a number of years, and then the whole of the property were used as B&B for the remainder, the PPR relief is calculated, is it not, by bringing in the initial PPR use as well as the last 36 months. In other words, PPR relief (including last 36 months) is given on the part of the property - in this case the whole - used as B&B for part of the time. My point was that it would be illogical for a taxpayer to be worse off if only part of the property were used as B&B.
You would not normally get letting relief on a B&B.
Instread, have you considered a just and reasonable apportionment of the part used for the B&B business? This is what s224 (1) has in mind. This part would then have BATR. Rule of thumb is no PPR relief if there is business use.
Bit Late!!
Sorry folks - I never saw the original post so couldn't comment, and I suppose it's a bit late now. Found the post today by sheer chance.
B&B strikes me as being a trade activity and so within s224 which should mean that part of the gain charged in full with no relief under s222/223, ie no last three years in any event but...
I think to case referred to by AnonymousUser was Owen v Elliott where a guest-house owner (B&B by another name) had occupied different parts of the house at different times of the year so that every part of the property had, at some time during their period of ownership, constituted their main residence - the court of appeal finding that the words residential accommodation meant as distinct from office accommodation.
Be interested to know what you eventually agreed.
Paul