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Doing the splits

04 June 2008
Issue: 4161 / Categories: Forum & Feedback
Allocating main residence tax relief to a property partly used as a 'bed and breakfast' business

I have been asked to advise on the capital gains implications of the expected sale of a single residential property which for part of the period of ownership was partly used as bed and breakfast accommodation and reflected as giving rise to Schedule D Case I income in the relevant tax returns. The property is the clients' only residence. The dilemma I find myself faced with is of course the conflict between residential property letting relief in TCGA 1992 s 223 and the business use exclusions in TCGA 1992 s 224.

I have read with interest Malcolm Gunn's article 'Splitting up the home' (Taxation 7 August 2003) but cannot relate any example to this particular situation given that the case of Owen v Elliott [1990] STC 469 established that relief under s 223(4) was available even for residential accommodation used...

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