Tax Insider Tip: Maximising PPR When Selling Land

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There is a restriction on the size of garden or grounds attached to a main residence that can be granted PPR relief. The ‘permitted area’ must not exceed half a hectare (approximately 1.25 acres); this area is the total area, including the grounds on which the residence is built.

However, a larger area may be permitted should it prove to be needed for the ‘reasonable enjoyment’ of the house as a residence, commensurate with the size and character of the property.

Care must be taken as to the order of sale – if the property is sold before the land then CGT will be charged as the land will no longer be ‘attached’ to the residence. If PPR is claimed HMRC will want to know what has changed such that land necessary for the ‘reasonable enjoyment’ of the house before sale was not so required afterwards.

Mr Varty purchased a house comprising land of less than one acre. He sold the house with part of the garden and applied for planning permission for the remainder which was sold four years later. HMRC charged CGT on the second sale and the taxpayer appealed, contending that the land had been ‘enjoyed’ as part of his main residence and that the gain was PPR exempt.

It was held that PPR did not apply.

This is a sample tip taken from our 136 page guide:
101 Ultimate Tax Strategies Revealed.

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