PPR Relief on Sale of Garden

Principal Private Residence (PPR) relief from capital gains tax is applicable when you sell a property that has at any time been your only or main residence. But what if you are selling part of your garden?

PPR Relief is also given against gains arising on a disposal of land which you have for occupation and enjoyment with that residence as its garden or grounds up to the “permitted area”. This means PPR relief may be available on a sale of part of the garden without the sale of the house. The house merely needs to have been occupied by the you at some point during ownership, but the garden has to be occupied with the house at the time of the disposal. Because of this, if part of the garden is retained following a disposal of the house then a subsequent gain arising on a sale of the part retained will not qualify for relief.

The permitted area referred to above is 0.5 of a hectare (including the house) but can be a larger area if it is required for the reasonable enjoyment of the dwelling-house as a residence, having regard to the size and character of the dwelling-house. A gain arising on a disposal of part of the garden or grounds out of the permitted area can qualify for relief but HMRC are likely to challenge a claim for relief on a part disposal out of garden or grounds which exceed the permitted area. HMRC’s published view is that where there is such a disposal it may be prima facie evidence that the part disposed of was not required for the reasonable enjoyment of the dwelling-house as a residence so the conditions for relief are not all met.
Garden or grounds in excess of the permitted area are not the only source of potential difficulty. Other problem areas include plots of garden or grounds which are somehow separate from the main plot and buildings which are separate from the main house. As with all valuable tax reliefs, traps for the unwary exist and great care must be taken to prevent relief being denied.