Taxation of Chargeable Gains Act 1992 section 4BB

Residential property gain or loss

Section 4BB defines how to calculate a "residential property gain" or "residential property loss" for capital gains tax purposes, using a specific method that apportions gains between the residential and non-residential elements of a disposal.

• A residential property gain or loss is the portion of an overall chargeable gain or allowable loss that relates to residential property interests, calculated using a defined formula.
• The computation uses a fraction — the "residential property proportion" — which represents the extent to which the asset disposed of consists of or relates to a residential property interest.
• If an asset is wholly a residential property interest, the entire gain or loss is treated as a residential property gain or loss; if there is no residential property element, the residential property gain or loss is nil.
• This distinction matters because residential property gains may be subject to different (typically higher) capital gains tax rates than gains on other types of asset.

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