Private Residence Relief - Property with Large garden/grounds - Community Forum

My apologies for the rather long and detailed post and although the questions at the end are quite concise I think the detail beforehand is necessary: My wife and I are considering gifting a share of our main residence which has a large garden/grounds to our daughter so that she may live there with us as her main residence. When investigating the potential CGT liabilities of such a transaction I’ve discovered an ambiguity in the HMRC rules/guidelines that make it difficult to assess whether a CGT liability arises unless we make the gift and present HMRC with notification for them to make an assessment (i.e. we need to commit to making the gift and then could find out afterwards that we are liable to pay some CGT) . My wife and I have lived in the property as our main (and only) residence continuously since we bought it in 1991. The property is located in a very rural area in the Forest of Dean and is immediately surrounded by open farmland on one boundary, Forestry England woodland on another and a similar sized residential property on the remaining boundary. The fenced off garden/grounds extends to approximately 4.5 acres. Approximately 1/3 of the plot comprises the large house (5 beds), a large garage, a hobby workshop and an old stone barn that is used for general storage of garden tools etc. together with formal gardens, a large vegetable plot, a small mixed-fruit orchard and driveway etc. The remainder of the grounds comprises two grassed paddocks (with a few trees) that are used entirely as a recreational benefit to the property: - Grazing our ponies, a couple of pet sheep and a few chickens - Exercising the dogs and generally being a nice environment to relax in In assessing the potential liability of making the gift of a share of the entire property to our daughter (we would hold the property as joint tenants in common in unequal shares) I am fully aware of the IHT situation. However, the CGT situation appears to be more murky and indeterminate: 1). I am aware that because the property is and has been my wife and I’s ‘main residence’ and never used for business purpose since we bought it we should be able to get full Private Residence Relief (PRR) with respect to not having a CGT liability on gifting a share of it to our daughter. 2). However, I note from the HMRC guidelines that to be eligible for automatic full PRR the garden/grounds should be less than the permitted area of 0.5 hectare (which at 1.8 hectares they are clearly not). 3). I also note that HMRC guideline say “Where the area required for the reasonable enjoyment of the dwelling-house (or of the part in question) as a residence, having regard to the size and character of the dwelling-house, is larger than 0.5 hectares, that larger area shall be the permitted area”. I believe that it would be easy to argue the claim that the property reasonably meets the eligibility criteria in bullet point 3). above as: The grounds are used purely in connection with the recreational enjoyment of the property and have never been used for commercial purposes The property is set in a open rural landscape within farmland, forestry and a scattering of similar sized rural residential properties making this ‘the norm’ for properties in the area where many people keep horses and/or sheep/goats etc. as a hobby. Due to local terrain, accessibility and planning constraints in the area the grounds have no commercial value ( planning permission for business or further residential development would not be granted under the existing ‘local development plan’) and the ground is of poor agricultural quality ( rocky ground and steep terrain) The issue that I have is that the HMRC guidelines and process for eligibility to claim full PRR on the proposed gift appears to leave me in an ambiguous position in that I appear to be unable to determine whether or not full PRR would be granted until I have actually irreversibly made the gift transaction. I.e I need to make the gift, notify HMRC and await for them to make a judgement one way or the other leaving me open to a potentially large CGT bill (or the hassle of arguing my case further) if the HMRC decision doesn't go in my favour. My questions are: - Is there a way that I can get a judgement from HMRC on how they would treat these specific circumstances prior to my making the decision to make the gift? - Alternatively, do I just have to go ahead and make the gift and fight this through the HMRC processes ?– Which is an entirely unsatisfactory route as the apparent vagaries of the HMRC CGT process are therefore not allowing me to make informed decisions before I have to make them. - Or can I just assume that the gift of part of the property will meet the criteria and that full PRR on the gift would be given and because there is no CGT liability not have to report anything to HMRC? Many thanks for any replies Clyde

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Private Residence Relief - Property with Large garden/grounds