PPR relief exempts (wholly or in part) a gain arising on the disposal of an individual's main residence.
This can be an important relief in reducing
capital gains tax on the disposal.
As a building is legally part of the land on which it stands
principal private residence relief may be obtained on the disposal of a building which is owned together with the main house if it is:
- part of the main residence , or
- within the permitted area of garden or grounds
Therefore of key importance is to first consider whether the barn
would be included within the definition of 'residence'. The tax
legislation applies the relief to a dwelling house so whether relief was granted or not would depend on whether the barn was part of the dwelling house.
The Court of Appeal has stated that no building can form part of a dwelling house with the main house unless that building is '...appurtenant to, and within the curtilage of...' the main house.
Curtilage is defined as `a small court, yard, or piece of ground,
attached to a dwelling house and forming one enclosure with it'.
Whether one building is within the curtilage of another will depend
primarily on a close geographical relationship between them.
Furthermore, because the test is to identify an integral whole, a wall or fence separating two buildings will normally be sufficient to establish that they are not within the same curtilage.
Generally the barn must be close to the main house and an integral part of it to qualify for relief.
A building which is appurtenant to the main house passes with it on a conveyance without having to be specifically mentioned.
So based on this you would need to determine whether the barn was
within the curtillage and appurtenant to the main house. If the barn was close to the main house and actually used as part of the residence (eg for storage etc) a disposal would be likely to be covered by PPR relief.
In any case as well as falling within the definition of a dwelling
house, if a building would in any case be within the permitted area of garden or grounds it will qualify for relief regardless of whether it is part of the dwelling house. The permitted area is automatically given as garden or grounds actually used for the residence of up to 1.25 acres (0.5 hectares).
Therefore if the disposal of a barn was within the permitted area it should qualify for relief.
The Revenues own internal manuals state that '...you should not raise enquiries in cases whether the total garden and grounds do not exceed the area which qualifies automatically for relief...'
