Principal Private Residence relief cannot be claimed for any part of the main residence that is used exclusively for business use.
To protect the exemption, any part of the home that is used for business purposes needs to also be available for private use. For example, a room used as an office from which to run the business during the day could also be used by the taxpayer’s children to do their homework in the evening.
Where there is exclusive business use, any gain arising on sale must be apportioned and the proportion relating to exclusive business use will be charged to capital gains tax (CGT). However, the gain relating to the use of one room may be below the annual exempt amount and not be charged.
Example:
Julia runs a marketing business from home. Her home has eight rooms and she uses one exclusively as an office.
On the sale of her property, she realises a gain of £50,000.
One-eighth (£6,250) would be charged to CGT.
To the extent that her annual exemption (£11,100 for the tax year 2015/16) remains available, this would shelter the gain with the result that no CGT is payable.
Please register or log in to add comments.
There are not comments added