Q&As

If a person combines two adjoining properties into one dwelling and lives in the dwelling as their main and only residence, what are the capital gains tax consequences when they sell the dwelling? What factors do HMRC consider relevant when making an assessment as to whether there are one or two properties?

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Published on: 25 August 2020

If the owner of the enhanced Dwelling occupies it as their only or main residence, principal private residence relief (PPR relief) from Capital gains tax should apply to any Gain made on a disposal of it. For information on PPR relief under sections 222–226 of the Taxation of Chargeable Gains ACT 1992 (TCGA 1992), see Practice Note: CGT—PPR relief.

In order to be eligible for PPR, the new property formed by combining the previous two properties must be a single ‘dwelling’ for the purposes of the relief. See HMRC’s Capital Gains Manual at CG64200C onwards and in particular at CG64240. A number of the case law on this subject addresses separate buildings which are claimed to together represent a single dwelling, but in this

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Jurisdiction(s):
United Kingdom
Key definition:
Dwelling definition
What does Dwelling mean?

A dwelling includes: • a building or part of a building which is used or suitable for use as a single dwelling or is in the process of being constructed or adapted for such use • gardens and grounds • land which subsists for the benefit of the dwelling • off plan purchases where the building has not yet been constructed

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