chapter 8 - private residence relief

private residence

• individuals main or only residence.

• includes garden of up to half a hectare

• no CGT bc of private residence relief

• if tax payer hasnt lived there for whole period of ownership, then only gain relating to period of occupation will be exempt

private residence formula

gain * (period of occupation / period of ownership)

deemed occupation

• period of time when HMRC treats taxpayer as occupying the property for private residence relief purposes, even if the taxpayaer hasn’t acc lived there.

• last 9 months are always deemed occupation in full, provided the property was the taxpayers private residence at some point

• certain periods of absence are deemed occupation, given that they are preceded and followed by actual occupation:

• - any period which the owner was abroad due to employment

• - any periods (<4yrs) where employed owner hare to work away from home in the UK

• - any periods (<4yrs) where owner is self-employed was working away from home in the UK or overseas

• - absence for any reason whatsoever, but up to 3 years

part occupation

if part of the residence is used for business purposes, then PRR is not calculated for that portion

only residential areas qualify for relief

more than one residence

• taxpayer can choose which property is treated as their main residence for PRR, provided they have lived in each property at some point

• if the taxpayer must live in job-related accommodation, their own home can be treated as their main residence

ruling for married couples

can only have one main residence between them for PRR purposes

tax planning

the taxpayer myst live in property before and after absence to preserve PRR

the final 9 months of ownership qualify for PRR whether occupied or not, and selling within this period can reduce or eliminate chargeable gain