Taxation of Chargeable Gains Act 1992, section 222

Relief on disposal of private residence

Part VII Other property, businesses, investments etc.

(1)This section applies to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in—

(a)a dwelling-house or part of a dwelling-house which is, or has at any time in his period of ownership been, his only or main residence, or

(b)land which he has for his own occupation and enjoyment with that residence as its garden or grounds up to the permitted area.

(2) In this section “the permitted area” means, subject to subsections (3) and (4) below, an area (inclusive of the site of the dwelling-house) of 0.5 of a hectare.

[F1666 (3)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 of a hectare, that larger area shall be the permitted area.F1666]

(4)Where part of the land occupied with a residence is and part is not within subsection (1) above, then (up to the permitted area) that part shall be taken to be within subsection (1) above which, if the remainder were separately occupied, would be the most suitable for occupation and enjoyment with the residence.

(5)So far as it is necessary for the purposes of this section to determine which of 2 or more residences is an individual’s main residence for any period—

(a)the individual may conclude that question by notice to [F1667an officer of the BoardF1667] given within 2 years from the beginning of that period but subject to a right to vary that notice by a further notice to [F1667an officer of the BoardF1667] as respects any period beginning not earlier than 2 years before the giving of the further notice,

F1668 (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1669 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F1670 (5A)But a notice or further notice under subsection (5)(a) determining which of 2 or more residences is an individual’s main residence for any period may be given more than 2 years from the beginning of the period if during the period the individual has not held an interest of more than a negligible market value in more than one of the residences.F1670]

(6)In the case of [F1671an individual living with his spouse or civil partnerF1671] —

(a)F1673there can only be one residence or main residence for both, so long as living together and, where a notice under subsection (5)(a) above affects both [F1672the individual and his spouse or civil partnerF1672] , it must be given by both, ...

F1674 (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F1675 (6A)Where an individual has determined, by giving notice under subsection (5)(a), that a residence is the individual's main residence, that determination does not cease to be effective at any time by reason only of the fact that, at that time, another of the individual's residences is treated by section 222B(1) as not being occupied as a residence (or, having been so treated, is no longer so treated).F1675]

(7) In this section and sections [F1676 222A F1676] to 226, “the period of ownership” where the individual has had different interests at different times shall be taken to begin from the first acquisition taken into account in arriving at the expenditure which under Chapter III of Part II is allowable as a deduction in the computation of the gain to which this section applies, and in the case of [F1677 an individual living with his spouse or civil partner F1677] —

(a)F1679if the one disposes of, or of his or her interest in, [F1678a dwelling-houseF1678] or part of a dwelling-house ... to the other, and in particular if it passes on death to the other as legatee, the other’s period of ownership shall begin with the beginning of the period of ownership of the one making the disposal, and

(b)if paragraph (a) above applies, but the dwelling-house or part of a dwelling-house was not the only or main residence of both throughout the period of ownership of the one making the disposal, account shall be taken of any part of that period during which it was his only or main residence as if it was also that of the other.

(8)If at any time during an individual’s period of ownership of a dwelling-house or part of a dwelling-house he—

(a)F1680resides in living accommodation which is for him job-related ..., and

(b)intends in due course to occupy the dwelling-house or part of a dwelling-house as his only or main residence,

this section and sections 223 to 226 shall apply as if the dwelling-house or part of a dwelling-house were at that time occupied by him as a residence.

[F1681 (8A)Subject to subsections (8B), (8C) and (9) below, for the purposes of subsection (8) above living accommodation is job-related for a person if—

(a)it is provided for him by reason of his employment, or for his spouse [F1682 or civil partnerF1682] by reason of [F1683 the spouse’s or civil partner'sF1683] employment, in any of the following cases—

(i)where it is necessary for the proper performance of the duties of the employment that the employee should reside in that accommodation;

(ii)where the accommodation is provided for the better performance of the duties of the employment, and it is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees;

(iii)where, there being a special threat to the employee’s security, special security arrangements are in force and the employee resides in the accommodation as part of those arrangements;

or

(b)under a contract entered into at arm’s length and requiring him or his spouse [F1682 or civil partnerF1682] to carry on a particular trade, profession or vocation, he or his spouse [F1682 or civil partnerF1682] is bound—

(i)to carry on that trade, profession or vocation on premises or other land provided by another person (whether under a tenancy or otherwise); and

(ii)to live either on those premises or on other premises provided by that other person[F1684 ; or

(c)an armed forces accommodation allowance for or towards costs of the accommodation is paid to, or in respect of, the person or the person's spouse or civil partnerF1684] .

(8B)If the living accommodation is provided by a company and the employee is a director of that or an associated company, subsection (8A)(a)(i) or (ii) above shall not apply unless—

(a)the company of which the employee is a director is one in which he or she has no material interest; and

(b)either—

(i)the employment is as a full-time working director, or

(ii)the company is non-profit making, that is to say, it does not carry on a trade nor do its functions consist wholly or mainly in the holding of investments or other property, or

(iii)the company is [F1685 a charitable companyF1685] .

(8C)Subsection (8A)(b) above does not apply if the living accommodation concerned is in whole or in part provided by—

(a)a company in which the borrower or his spouse [F1686 or civil partnerF1686] has a material interest; or

(b)any person or persons together with whom the borrower or his spouse [F1686 or civil partnerF1686] carries on a trade or business in partnership.

(8D)For the purposes of this section—

(a)a company is an associated company of another if one of them has control of the other or both are under the control of the same person; and

(b) “employment”, “director”, “full-time working director”, “material interest” and “control”, in relation to a body corporate, have [F1687 the meanings given by Chapter 2 of Part 3 of ITEPA 2003 F1687] [F1688 ; and

(c) “armed forces accommodation allowance” means an allowance which is exempt from income tax by reason of section 297D of ITEPA 2003. F1688,F1681]]

(9)[F1689 Subsections (8A)(b) and (8C) aboveF1689] shall apply for the purposes of subsection (8) above only in relation to residence on or after 6th April 1983 in living accommodation which is job-related [F1690for the purposes of that subsectionF1690] .

(10)Apportionments of consideration shall be made wherever required by this section or sections 223 to 226 and, in particular, where a person disposes of a dwelling-house only part of which is his only or main residence.

Definitions used in section 222 17

the individual

13C (1) The receipt of the replacement value by the original supplier shall be disregarded for the purposes of paragraph 13B above, as it applies in relation to the shares, to the extent to which that receipt has previously been set (under that paragraph) against any receipts of value which are, in consequence, disregarded for the purposes of paragraph 13 above as that paragraph applies in relation to those shares or any other shares subscribed for by the individual in question (“the individual”).

Defined in Sch.5B para.13C(1) · see it in the full Act
period of ownership

(7A) Paragraph (b) of the definition of “period of ownership” does not apply in a case where paragraph 8 or 14 of Schedule 4AA applies (the individual has made an election for the retrospective basis of computation to apply).

Defined in s.223(7A) · see it in the full Act
land

“land” includes messuages, tenements, and hereditaments, houses and buildings of any tenure;

Defined in s.288(1) · see it in the full Act

(b) “land” includes buildings.

Defined in Sch.2 para.9(5) · see it in the full Act
notice

“notice” means notice in writing;

Defined in s.288(1) · see it in the full Act
the Board

“the Board” means the Commissioners of Inland Revenue;

Defined in s.288(1) · see it in the full Act
market value

(5AA) In this Act “market value” in relation to shares of a given class in an open-ended investment company the prices of which are published regularly by the authorised corporate director of that company (whether or not those shares are also quoted in The Stock Exchange Daily Official List) shall mean an amount equal to the price so published on the relevant date, or if no price was published on that date, on the latest date before that date.

Defined in s.272(5AA) · see it in the full Act

(5) In this Act “market value” in relation to any rights of unit holders in any unit trust scheme the buying and selling prices of which are published regularly by the managers of the scheme shall mean an amount equal to the buying price (that is the lower price) so published on the relevant date, or if none were published on that date, on the latest date before.

Defined in s.272(5) · see it in the full Act

(1) In this Act “market value” in relation to any assets means the price which those assets might reasonably be expected to fetch on a sale in the open market.

Defined in s.272(1) · see it in the full Act

(4) In particular, for the purposes of paragraphs 5 and 7 of this Schedule “market value” has the meaning given by paragraph 92 of Schedule 2 to that Act (determination of market value); and Part 8 of this Act has effect subject to this paragraph.

Defined in Sch.7D para.1(4) · see it in the full Act
securities

(6) In sub-paragraph (4)(d) “securities” has the same meaning as in section 132.

Defined in Sch.4B para.12(6) · see it in the full Act

(2) In sub-paragraph (1)(a) “securities” has the same meaning as in section 132.

Defined in Sch.4B para.7(2) · see it in the full Act
arrangements

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

Defined in s.16A(2) · see it in the full Act
trade

“trade” has the same meaning as in the Income Tax Acts;

Defined in s.288(1) · see it in the full Act

(b) “trade”, “profession” and “vocation” have the same meaning as in the Income Tax Acts.

Defined in s.165(8) · see it in the full Act

(9) In this section and Schedule 7 and in determining whether a company is a trading company for the purposes of this section and that Schedule, the expression “trade” shall be taken to include the occupation of woodlands where the woodlands are managed by the occupier on a commercial basis and with a view to the realisation of profits.

Defined in s.165(9) · see it in the full Act
profession

(b) “trade”, “profession” and “vocation” have the same meaning as in the Income Tax Acts.

Defined in s.165(8) · see it in the full Act
vocation

(b) “trade”, “profession” and “vocation” have the same meaning as in the Income Tax Acts.

Defined in s.165(8) · see it in the full Act
company

“company” includes any body corporate or unincorporated association but does not include a partnership, and shall be construed in accordance with section 99 ;

Defined in s.288(1) · see it in the full Act

(5) In this paragraph “company” and “group” shall be construed in accordance with section 170(2) to (9).

Defined in Sch.2 para.5(5) · see it in the full Act
property

(6) Sub-paragraphs (4) and (5) above apply for the purposes of paragraph (b) of sub-paragraph (1) above as they apply for the purposes of paragraph (a), reading “income” for “property".

Defined in Sch.5 para.2(6) · see it in the full Act

(a) the reference to “assets” were a reference to “property”, and

Defined in Sch.4ZA para.22(2) · see it in the full Act
control

Section 1124 of CTA 2010 (meaning of “control") applies for the purposes of this sub-paragraph.

Defined in Sch.5AA para.4(3) · see it in the full Act

(d) for the purposes of any attribution under section 451(4) (rights of a person's associates to be attributed to the person etc in determining “control”) the rights and powers of a person (“A”) are not to be attributed to another person (“P”) merely because A is a partner of P , and

Defined in Sch.5AAA para.46(2) · see it in the full Act

“control” shall be construed in accordance with sections 450 and 451 of CTA 2010 ;

Defined in s.288(1) · see it in the full Act
ITEPA 2003

“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003 ;

Defined in s.288(1) · see it in the full Act
income

(6) Sub-paragraphs (4) and (5) above apply for the purposes of paragraph (b) of sub-paragraph (1) above as they apply for the purposes of paragraph (a), reading “income” for “property".

Defined in Sch.5 para.2(6) · see it in the full Act
tax

and for the purposes of this definition “tax” means capital gains tax, corporation tax or income tax.

Defined in s.16A(2) · see it in the full Act

Cases considering section 222 7

David Hyman & Anor. v The Commissioners for HMRC

[2022] EWCA Civ 185 · 17 February 2022Limits

The court distinguished the capital gains tax residence-relief provision from section 116 of the SDLT legislation. Section 222 concerns the extent of relief, not the general characterisation of property. (see paras [20]; [28]-[30]) Identifies the residential property and associated land to which the capital gains tax relief applies. The court used this function to distinguish section 222 from the SDLT property-characterisation provision. (see para [28]; [30]) Sets a bright-line permitted area of 0.5 hectares, inclusive of the dwelling-house site, for the capital gains tax relief. The court contrasted that quantitative limit with the absence of any equivalent limit in section 116. (see para [28]-[30]) Permits the capital gains tax permitted area to exceed 0.5 hectares where the larger area is required for reasonable enjoyment having regard to the dwelling-house’s size and character. The court held that this test could not be imported into section 116. (see paras [20]; [28]-[30])

Higgins v Revenue And Customs

[2019] EWCA Civ 1860 · 4 November 2019Limits

The court construed section 222 together with section 223 as requiring a period of ownership connected with actual ownership of the dwelling-house, rather than automatically with contract timing. (see paras [15]; [25]; [29]) The court used the only-or-main-residence requirement as part of the statutory setting. The appeal turned on when the period of ownership began, not on the taxpayer’s residence after completion. (see paras [10]; [15]) The court confirmed that a taxpayer with two or more residences may choose which is treated as the main residence by notice, but cannot have more than one main residence at a time. (see para [27]) The court limited section 222(7) to successive interests where an earlier acquisition contributes to deductible expenditure. It does not define ownership generally or import section 28 into the relief calculation. (see para [26])

Longson v HM Inspector Of Taxes

[2001] EWCA Civ 364 · 13 March 2001Interprets

The provision is identified as defining the default permitted area at 0.5 hectare, inclusive of the dwelling-house site. The court used that baseline when considering whether a larger area could qualify. The court interpreted the enlarged permitted-area test objectively. A larger area qualifies only if, having regard to the dwelling-house’s size and character, it is required for reasonable enjoyment of the dwelling-house as a residence; desirability, convenience and personal interests are insufficient.

What each judgment says about section 222 is in the case-law panel in the full Act.

Amendments and notes

26 notes from legislation.gov.uk

Amendments

  1. F1666S. 222(3) substituted (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 59(2)
  2. F1667Words in s. 222(5)(a) substituted (with effect in accordance with Sch. 22 para. 7(1) of the amending Act) by Finance Act 2004 (c. 12), Sch. 22 para. 1(2)
  3. F1668S. 222(5)(b) repealed (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 59(3)(a), Sch. 41 Pt. V(10)
  4. F1669Words in s. 222(5) repealed (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 59(3)(b), Sch. 41 Pt. V(10)
  5. F1670S. 222(5A) inserted (with effect in accordance with s. 24(9) of the amending Act) by Finance Act 2020 (c. 14), s. 24(2)(a)
  6. F1671Words in s. 222(6) substituted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 117(2)(a)
  7. F1673Word in s. 222(6) repealed (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 59(4), Sch. 41 Pt. V(10)
  8. F1672Words in s. 222(6)(a) substituted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 117(2)(b)
  9. F1674S. 222(6)(b) repealed (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 59(4), Sch. 41 Pt. V(10)
  10. F1675S. 222(6A) inserted (with effect in accordance with Sch. 9 para. 10 of the amending Act) by Finance Act 2015 (c. 11), Sch. 9 para. 2(a)
  11. F1676Word in s. 222(7) substituted (with effect in accordance with Sch. 9 para. 10 of the amending Act) by Finance Act 2015 (c. 11), Sch. 9 para. 2(b)
  12. F1677Words in s. 222(7) substituted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 117(3)
  13. F1679Words in s. 222(7)(a) omitted (with effect in accordance with s. 24(10) of the amending Act) by virtue of Finance Act 2020 (c. 14), s. 24(2)(b)(ii)
  14. F1678Words in s. 222(7)(a) substituted (with effect in accordance with s. 24(10) of the amending Act) by Finance Act 2020 (c. 14), s. 24(2)(b)(i)
  15. F1680Words in s. 222(8)(a) repealed (with effect in accordance with Sch. 4 para. 18(4) of the amending Act) by Finance Act 1999 (c. 16), Sch. 4 para. 17(2), Sch. 20 Pt. III(7)
  16. F1681S. 222(8A)-(8D) inserted (with effect in accordance with Sch. 4 para. 18(4) of the amending Act) by Finance Act 1999 (c. 16), Sch. 4 para. 17(3)
  17. F1682Words in s. 222(8A) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 117(4)(a)
  18. F1683Words in s. 222(8A)(a) substituted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 117(4)(b)
  19. F1684S. 222(8A)(c) and word inserted (22.7.2020) by Finance Act 2020 (c. 14), s. 24(2)(c)
  20. F1685Words in s. 222(8B)(b)(iii) substituted (with effect in accordance with S.I. 2012/736, art. 8) by Finance Act 2010 (c. 13), Sch. 6 paras. 13(2), 34(2); S.I. 2012/736, art. 8
  21. F1686Words in s. 222(8C) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 117(5)
  22. F1687Words in s. 222(8D)(b) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 213 (with Sch. 7)
  23. F1688S. 222(8D)(c) and word inserted (22.7.2020) by Finance Act 2020 (c. 14), s. 24(2)(d)
  24. F1689Words in s. 222(9) substituted (with effect in accordance with Sch. 4 para. 18(4) of the amending Act) by Finance Act 1999 (c. 16), Sch. 4 para. 17(4)(a)
  25. F1690Words in s. 222(9) substituted (with effect in accordance with Sch. 4 para. 18(4) of the amending Act) by Finance Act 1999 (c. 16), Sch. 4 para. 17(4)(b)

Modifications

  1. C381S. 222(8A)-(8D) applied by Inheritance Tax Act 1984 (c. 51), s. 8H(7) (as inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), s. 9(4))