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limit of PPR relief

Trying to remember rules

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Just read a tax case (W&H Ritchie v HMRC) and am trying to rember the rules on PPR with a substantial garden.

If you buy a property with a garden > 1/2 a Hectacre and sell it later, assuming you have always lived in it, do you get full PPR abatement ?

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Stepurhan
By stepurhan
21st Sep 2017 15:26

The general rule is that the garden has to be required for reasonable enjoymennt of the house to qualify. If it's a tiny bungalow, you are less likely to get a half hectare accepted.

But, as with too many things in tax "required for reasonable enjoyment" is not rigidly defined. Since HMRC will often seek to point at other similar houses with smaller gardens, checking other houses nearby is always worthwhile.

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Northumberland flag
By MJShone
21st Sep 2017 15:40

Anything up to half a hectare (including the footprint of the house etc) is fine - even if the bungalow IS tiny! Where the area is beyond that the "reasonable enjoyment" test comes in.

The "reasonable enjoyment" test is objective ie it's not personal to that particular owner. History etc plays a part eg was the house built on that plot or has further land been acquired since the housed was built.

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Replying to MJShone:
Stepurhan
By stepurhan
21st Sep 2017 15:52

MJShone wrote:

The "reasonable enjoyment" test is objective ie it's not personal to that particular owner. History etc plays a part eg was the house built on that plot or has further land been acquired since the housed was built.

I acknowledge your point that the test only kicks in above a half hectare. Having checked I meant to correct my response to reflect that (as it is reflected in the original question) but failed to do so.

However, in what way is the "reasonable enjoyment" test objective? To take your example, you are saying that if someone had a 2 hectare piece of land and built a bungalow on it, that would qualify the whole area as garden (since the house was built on that plot). I have a new tax planning strategy for landowners if that is possible.

As I already said, HMRC will look at other similar houses with smaller gardens (they did in the case cited) in seeking to disallow claims. So, whilst history may be a factor, it is by no means the only one. As often is the case, it comes down to martialling your arguments in favour of your preferred view.

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Replying to stepurhan:
Northumberland flag
By MJShone
21st Sep 2017 16:15

It's objective in the sense that you can't say "It's required for MY reasonable enjoyment because I like to be at least 50 yards away from the neighbours".

I wasn't very clear with my 2 ha example. It was a point about history. Gardens used to be larger in the past. I can think of two towns where, in certain areas, people have sold off part of their gardens for building. Those who haven't wouldn't (shouldn't!) be penalised for having larger gardens that historically went with them.

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avatar
By floggy
21st Sep 2017 15:44

so, if it was bought with 2 Hectacres, and you sold it with the same 2 Hectares and you really enjoyed the land, should get 100% PPR ?

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Northumberland flag
By MJShone
21st Sep 2017 16:07

Not necessarily. The person who owned it before you, or before him, might have bought additional land. It all depends (as with everything in life!). I've had 29 acres accepted in the past - but that was a large country house.

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RLI
By lionofludesch
21st Sep 2017 16:33

I'm guessing that's a typo in the OP and talking about ½ a hectare and not ½ a hectacre.

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Replying to lionofludesch:
Northumberland flag
By MJShone
22nd Sep 2017 10:16

I hope so!

The permitted area's got bigger. Used to be one acre which was about 0.4 hectares. Half a hectare is a bit over 1.2 acres.

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