Client is about to sell his countryside home and surrounding fields. House and garden occupy just less than an acre and the abutting 50 acres of fields have been used for seasonal grazing by a farmer.
At first glance it appears clear cut. House and gardens worth around £1 million are CGT free and adjoining fields worth £1 million are liable to CGT.
But client is now fretting. He said that between 1982 and 1998 (16 years) the house was subject to an agricultural tenancy (which was lifted in 1998). Apparently, this meant that 3/4 of client's income was supposed to be derived from the land he owned.
As it turned out, income from these fields was minuscule in comparison with his other private and investment income. So he is worried because he feels that he occupied his home (and land?) illegally, until the tenancy was lifted in 1998.
He is worried in case HMRC say he cannot have PPR exemption for the period 1982 to 1998. I said in my view HMRC will not be concerned at all with such an illegal occupation. The fact is that this home has been his sole residence from 1982 to date, and that is all HMRC will be concerned about.
Am I correct. Or is client right to be worried.