Restriction of PPR

If part of your home is let it will not affect your exemption from capital gains tax, providing the ‘rent a room’ scheme applies.

HMRC publication IR87 page 9 states:

“The private residence relief is not affected if you have a lodger who is treated as a member of your family, sharing the living rooms and eating with you, even if he or she has a separate bedroom.”

Leaflet IR87 was withdrawn on 23/92005, but has been included in HMRC’s Capital Gains Manual at #64702.

HMRC consider the number of lodgers (at any one time) to be a critical factor, they consider there should be only one lodger. However this view is debateable.

If the rent a room scheme does not apply, it is important to measure the area of the let rooms and any other space for the exclusive use of lodgers (eg do they have there own bathroom?) and compare this to the rest of the house including any shared areas. All private areas and common areas are not in the rented area.