PPR relief on garden sold once house let out

PPR relief on garden sold once house let out

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This is a personal property query that is under enquiry with the Inspector and about which we've been arguing for nearly a year now. The facts are as follows:-

August 2003 - I moved out of a property that had been my PPR for five years and let it out, whilst moving into another property;

August 2004 - I sold part of the garden of the first property;

I have tried to claim PPR on the basis of the part of the garden being sold within three years of moving out.

The Inspector disagrees, claiming that the relief is only for the last three years of ownership of the property and, since I still own the property, that three year period hasn't happened yet.

My contention is that, had the entire property and garden been sold in August 2004, it would have been covered by the PPR exemption. If the Inspector is correct, it seems unfair as the gain on the garden would not benefit from this relief as, by the time the property is eventually sold, the garden will no longer be part of it. I've also made the point that, under HMRC's interpretation, the land was occupied and enjoyed by me as this is regarded as being the case by virtue of legal ownership as opposed to physical occupation.

Has anyone come across this and has a definitive answer? Otherwise, I may well chance my luck with the Commissioners as the answer I've been given seems unfair and I can't seem to find this particular point having previously been considered in the Courts.

I'll be very grateful for any input on this very tiresome matter.

Nicki Reynolds

Replies (5)

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By Paul Soper
21st Dec 2007 23:54

Hmmmm
The exemption in s222 is in two parts - the dwelling and the grounds within the permitted area. You don't mention whether the garden is within the permitted area, but assuming it is (given the officer bizarrely refers to the last three years of ownership rather than simply denies the relief) then provided it is sold at the same time, or before the disposal of the dwelling it should be exempt - and if exempt for the last three years exempt for the whole period. Don't claim on the basis of the last three years though - claim that it is a part disposal of the main residence and you should succeed. It is easy for them to resist a last three years claim as you still own the dwelling.

If this is grounds beyond the permitted area and you are trying to argue a larger area you are scuppered as that requires the land to be necessary - if it can be sold before the dwelling it cannot have been necessary - see the recent case of Henke & Henke v HMRC.

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By Euan MacLennan
22nd Dec 2007 21:48

No PPR relief
As she has not mentioned selling the house, I assume that Nicki still owns it now in December 2007, which is obviously more than 3 years after selling the part of the garden in August 2004. The last 36 months of deemed residence counts back from the date of sale, not forwards from the end of the actual residence. The sale therefore occurred during a period of letting when the property was not (deemed to be) her PPR. I am not in the office and do not have access to the reference books, but it seems to me that Nicki has no claim to PPR relief on the sale of the part of the garden and if so, the Inspector was obviously correct to deny relief at least until the house itself was sold.

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By Paul Soper
24th Dec 2007 12:03

Can I enquire how the gain is being calculated here?
This is a part disposal of a single asset which qualifies for exemption - I am not aware of any provision in s222 - 225 which gives the relief only on a full disposal. However if the gain on the disposal of the land was calculated as though it were a separate asset then I can see why the revenue are objecting to the relief. The exemption itself may be split into two parts, but the asset is, in law, indivisibly one until a part disposal of p[art of that one occurs.

If the occupation of the property had not ceased but the garden - as long as it is within the permitted area - was sold the gain would be exempt. There is no difference here other than the property not having been occupied as exempt for the whole of the period of ownership.

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By AnonymousUser
02nd Jan 2008 08:21

It is not...
...entirely clear from the question but it seems that a part of the garden may have been sold at a time when the property was let. If so, there may be a problem with getting PPR relief on any gain made on that disposal.

This is because Section 2221)(b) is written in the present tense and so requires the garden to be occupied and enjoyed by the seller at the time it is sold, if relief is to apply.

If the property was let, it may be that, under the terms of the lease, the tenant had occupation and enjoyment of the garden when the part was sold. This would be quite usual under many leases. If the tenant did have occupation and enjoyment at that time the owner did not. So the disposal of the part of the garden by the owner would not qualify for PPR relief at all

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By martin.jackson
08th Jan 2008 09:04

PPR Relief on part disposal
Nicki,

You may find the HMRC's Capital Gains Manual a useful reference point. Specifically, take a look at: http://www.hmrc.gov.uk/manuals/cg4manual/CG65125.htm

It gives a worked example of a part disposal and should make it clear that the final 36 months exemption is given.

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