Batey v Wakefield [1982] 1 All ER 61 (CA)

Facts

• Batey v Wakefield concerned the application of Private Residence Relief (PRR) under section 101 of the Capital Gains Tax Act 1979, which reduces Capital Gains Tax on the sale of a main residence.
• The case involved a property with land exceeding the statutory maximum of 0.5 hectares (approximately 1.24 acres).
• The owners claimed that the additional land was necessary for the enjoyment and effective use of the residence.
• The determination of whether excess land was "required" depended on the property’s characteristics, including its physical details, setting, and use.
• The Court of Appeal specified the need to evaluate each property individually, considering its scale, design, garden and land use, and local context.

Issues

1. Whether land exceeding 0.5 hectares could qualify for Private Residence Relief if it was necessary for the reasonable enjoyment of the property as a residence.
2. What factors should be considered to determine whether the additional land is required for the property’s use as a home.
3. How the PRR should be calculated when only part of the land qualifies for relief.

Decision

• The Court of Appeal clarified that in determining PRR, one must consider whether the land in excess of 0.5 hectares is required for the property’s enjoyment as a residence, based on its peculiar characteristics and context.
• It was held that the assessment must focus on the home’s physical features, its use, local circumstances, and typical land use in the area.
• A structured inquiry was emphasized, requiring analysis of the individual property, its size, how any gardens or outdoor areas are used, and the influence of local norms.
• The court affirmed that the whole property, not just isolated sections, must be reviewed when applying the rules.
• Where land exceeds the stipulated limit and does not meet the relevant criteria, partial relief should be calculated based on accurate valuations of the eligible area and residence.

Legal Principles

• Private Residence Relief under the Capital Gains Tax Act 1979 ordinarily applies to up to 0.5 hectares of land, unless a larger area is necessary for the reasonable enjoyment of the property as a residence.
• The necessity for extra land is a fact-sensitive inquiry involving consideration of property size, design, land use, and local characteristics.
• Later cases have affirmed the need to review the whole property and consider practical requirements arising from the nature of the property and the owner’s lifestyle.
• Accurate valuations are critical for dividing tax relief when land exceeds qualifying limits.
• Documentation and professional assessments (e.g., surveys and valuations) are important for supporting PRR claims.

Conclusion

The decision in Batey v Wakefield establishes that eligibility for Private Residence Relief on land exceeding 0.5 hectares depends on whether the additional land is reasonably required for residential enjoyment, taking into account the attributes of the property, how the land is used, and local circumstances; this principle guides both taxpayers and advisors in determining and evidencing PRR eligibility for capital gains tax purposes.