One of the most often used and valuable of the Capital Gains Tax (CGT) exemptions covers the sale of the family home. In general, there is no CGT payable on the sale of a property which has been used as the main family residence. An investment property which has never been used will not qualify. This relief from CGT is commonly known as private residence relief (PRR).One of the conditions for the relief is that the garden or grounds (including the buildings on them) are not greater than the permitted area: defined as less than 0.5 hectares (just over an acre) in total. In a recent Tribunal case, a couple appealed against assessments for CGT on the sale of their home, other buildings and land in Moneymore, Co. Londonderry in January 2007.The disputed question related to whether the “permitted area”, the area of the gardens and grounds that were required for the couple’s occupation and enjoyment, was greater than 0.5 hectares. There were two sheds on the land which the taxpayers argued were part of the dwelling house but HMRC argued was not. HMRC sought to specifically exclude the larger shed from qualifying for PRR. There was also a further procedural issue as to whether HMRC’s assessments were issued out of time.The background to this case is a complex and long running saga. The Tribunal examined the underlying transactions in great detail, including whether the couple and their advisers took reasonable care in claiming PPR. The couple was found to have done so but their advisers were found to have acted carelessly. It was clear that the size of the garden and grounds were in excess of the permitted area of 0.5 hectares and that some CGT was due although far less than the amount originally assessed by HMRC. This case serves as an important reminder for taxpayers to ensure that all the various conditions for PRR are met in order to qualify for the relief.Planning note: If you are considering a partial or complete disposal of the land or outbuildings that form part of your family home, we offer a CGT planning check to ensure that you would not pay any unnecessary CGT. This will involve careful consideration of the proposed disposal and the timing of the various stages to avoid or reduce any potential tax liability.