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Capital Gains Tax: What Is Classed As Residential Property?

How about an orchard?

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Posted by Helen Beaumont on 25/08/2021 @ 8:00AM

Changes to taxes over the years mean the tax treatment of residential property and commercial property is different. However, sometimes the Government gets the definition of 'residential' muddled when it comes to different taxes, leading to unpredictable results ...

What defines a residential property? Well, that rather depends!

What defines a residential property? Well, that rather depends!

copyright: marco roosink / pixabay

When it comes to land and whether it would be classed as residential property for tax purposes, things can get very confusing. I recently had a case where I had to decide if an orchard would be classed as residential or not.

"As there are four different Capital Gains Tax rates, and that rate depends on the type of asset being disposed of!"

Normally, residential property is subject to either 18% or 28% depending on the tax rate bands, but deciding if our orchard is residential or commercial is not as easy as it first seems.

If the land, during relevant ownership had, or still has, a dwelling on or attached, then that should mean it is residential property because the definition of 'residential' is quite broad.

There are exceptions:

  • Residential accommodation for school pupils

  • Residential accommodation for armed forces personnel

  • A home/institution for children

  • A home/institution for individuals requiring personal care for old age, disability, substance dependency or mental disorders

  • A hospital or hospice

  • A prison or other secure facility

  • A hotel or similar establishment

And you also need to look at the recent past of the property too. If it is currently residential property, then what was it a few years ago? If our orchard was attached to a small freehold, or maybe a garden centre that was closed when the owners retired, then you'd have to apportion any gains on a fair basis before submitting any Capital Gains Tax return on disposal.

"There are many other considerations that must be taken into account!"

Establishing if our orchard, or any other piece of land, falls under the residential property classification for Capital Gains Tax is a complex process, and both the history and the future use of the land must be taken into account as well as what is happening there now.

You really should talk to a tax advisor.

Until next time ...



Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.

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About Helen Beaumont ...


Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.