In 1980 or thereabouts when my grandfather passed away, my mother, along with her two sisters and my grandmother inherited property combined of residential dwelling on the upper floors and commercial units on the ground and lower ground floor, in four equal shares. In 2011, when my grandmother passed away, my mother and her two sisters inherited my grandmother’s shares in equal shares. One of the sisters wishes to have a long term lease of the commercial premises for 99 or 150 years, and is prepared to pay my mother one-third of her share of the current market purchase price. Will my mother have to pay capital gains tax? Whilst she has not run the business as such, she has always or at least for the past 10 years lived at the residential premises above the commercial property. 

In a nutshell, your mother is selling most of the value of her 1/3rd share in the property. She has owned 25% of the property since 1980, and its value must have increased considerably since then. She has owned a further 8.3% of the property (1/3rd of a quarter) since 2011, and quite likely it has gone up in value since then. So she is making a capital gain. However, if she has lived in the residential premises above the commercial property as her main residence, then she will be eligible for principal private residence relief (for the amount of time she has lived in it, plus ‘final period exemption’ plus ‘letting exemption’) for the proportion of the total gain attributable to the residential unit.