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Private Residence Relief
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Principal Private Residence Relief
Reducing CGT with Principal Private Residence ReliefIf you're looking to reduce your capital gains tax charge on the disposal of UK or overseas property, claiming principal private residence ('PPR') relief can significantly reduce your tax bill. The rules applying to PPR relief aren't straightforward but we have a number of books and articles that will clearly explain when you can and can't claim this relief. A common area of confusion arises in the application of the principal private residence relief election. Many people think this applies when you own two properties and allows you to avoid choose which property will attract PPR relief. This is not strictly the case. In order to qualify for the election a property needs to be your residence - not simply a property that you own. 'Residence' implies that there must be some degree of occupation by you. Therefore a property that was let, and never occupied by you couldn't qualify as a residence for this purpose. There are though other options that could be considered.
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Principal Private Residence Relief |
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We can provide you with help on the application of the principal private residence relief rules via our online Capital gains tax help service. About Our Editor
The Editor of our website is Lee Hadnum. Lee is a rarity among tax advisers having both legal and chartered accountant qualifications. After qualifying a prize winner in the Institute of Chartered Accountants exams, he also went on to become a chartered tax adviser (CTA).He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author. Google+ Tax Articles on Principal Private Residence Relief
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Calculating business use and the effect on CGT - USERNAME: t.dhanjal - 04/06/2012
Tax Question: Hi, I have various clients who are Ltd Co contractors who have offices set up at home. I understand the HMRC allow a flat rate claim of ?4 per week without the need to produce any receipts or evidence. I also understand there is a more complex, in-depth calculation that can be performed such as measuring the % area of your home that is used as a business office and applying this to the average monthly costs of the home. Question By claiming for the latter or former, does this have any other tax implications [such as CGT] if: a] the contractor is the home owner [principle residence] b] rents from a landlord Thanks . . .
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Tax planning when investing in UK property
30/05/2012
We're often asked for any tax planning opportunities where a UK non-resident and non-domiciled individual wishes to purchase a UK property. In this article we look at some of the tax planning issues and opportunities available . . .
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PPR relief and determining the validity of a PPR election - USERNAME: Cashbuyer - 16/04/2012
Tax Question: I refer to my recent question entitled "PPR relief election for spouses". In the final paragraph of your response you state "In terms of the new property -- this will depend on the status of the original election and variations. If these were invalid then a new election would need to be made. If these were valid then as these would be in force you'd need to submit a variation [which would need to be in joint names as it effects the PPR position of both spouses]." How can I determine whether the initial election [in my sole name] was valid? The subsequent variations are less important because Property C was occupied as a matter of fact, but I need to be sure about the initial election so we can decide whether to now make a variation or start from scratch with a brand new election? Many thanks . . .
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PPR relief election for spouses - USERNAME: Cashbuyer - 10/04/2012
Tax Question: In 2007 I purchased a second home [Property B]. Shortly after purchase I made a PPR election nominating my home for the previous 10 years[Property A] as my main residence, with the intention of varying the election later. Property A was owned jointly with my wife wheras Property B was in my sole name. I made the PPR election in my sole name and it was acknowledged by HMRC. In 2010 I varied the election to a rental property I had owned for some time, in my sole name, [Property C], but on the variation I said "we wish to vary the election" rather than "I wish...". For a period of 7 months I occupied Property C with my wife as our main residence, while occupying Property A most weekends. We changed our address on the Electoral Register to Property C and notified Council Tax etc. HMRC wrote back to me regarding the 2010 variation stating "If an election under TCGA 1992 S222 [5] affects both a man and wife, the election must be signed by both of them. As the election has not been signed by your wife I am unable to acknowledge receipt. Please can you re-submit the election with signatures from both you and your wife." I was advised at that time to write back explaining that although my wife lives with me I am the owner of the property [Property C] and therefore I would like to vary the election. I re-iterated the same wording I used in the first variation but instead of using the word "we" I changed it to "I". HMRC did not respond. I was also advised that a husband and wife cannot have more that one Main Residence [unless separated]and so an election or variation by the husband automatically includes the wife. 1] Bearing in mind that Property B was solely in my name but Property A was in joint names was the original PPR Election actually valid? 2] Were either of the variations I sent valid? 3] As we occupied Property C for at least 5 days a week for a period of 7 months, will I still qualify for PPR Relief and Lettings Relief even if none of the elections or variations were valid? More recently I sent a further variation to HMRC electing Property A as my main home once again, and this is where we currently live. HMRC did not respond. We have now purchased another residence [Property D], in joint names and intend to move into it for 5 months while building works are carried out on Property A. 4] Should we start from scratch and make a brand new PPR Election in both names or would a further variation suffice? 5] If a further variation will suffice should it be in my sole name [because the original election was in my sole name] or should we both sign it this time? Many thanks. . . .
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PPR relief on the disposal of a new property/tax relief for a finders fee - USERNAME: Cashbuyer - 03/04/2012
Tax Question: We have just purchased a house [property A] which is an addition to an existing property portfolio. We intend to live in property A for a few months as our main residence while we develop the house we a have been living in until now [property B]. After developing property B we will either sell it or move back into it. In the longer term we will hold property A as a rental investment. 1. Will our occupation of property A as our main residence for approximately 5 months be a sufficient amount of time to enable us to claim PPR relief and lettings relief when we sell it in 2 or 3 years? 2. Would it be necessary to notify HMRC that we wish to vary our current election? We have incurred a finders fee relating to property A and would like to offset it against income if possible [rather than capital gains on disposal]. We have the opportunity to rent out property A for 4 weeks under a licence before we move into it and in combination with the rent we will earn on property A after we vacate, the rental income for the current tax year will exceed the amount of the finders fee. 3.Will letting property A under licence for 4 weeks before we move in enable us to treat the property as an investment from the outset and treat the finders fee as an expense? . . .
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Last 36 months deemed occupation for PPR relief purposes - USERNAME: Enquirer - 28/03/2012
Tax Question: A couple have lived in a house as their main residence for 20 years. They recently moved to another house they own. They want to rent their original house while waiting for a buyer, but are worried about the possibility of losing the principal residence capital gains tax relief. My understanding is that they can rent it for up to 3 years without losing their main residence relief. However, a friend said that his accountant told him that if they move to another property they already own, then this does not apply. Is there any truth in this? Thank you for your help. . . .
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Disposal of property by ex partner and CGT - USERNAME: Heligs - 15/03/2012
Tax Question: I was in a long-term relationship [we were living together but not married]. I had owned/invested in my own property before meeting my partner. I sold this to purchase our first main residence. We bought and moved several times over 21 years. In 1998 I bought another small Flat to be closer to my new job. My partner continued to live in our home with my sons. In 2002 we both split up. My partner would not sell our family home on the basis that he also used it for his business premise. In 2009 he married and was selling our family home. I had put a 2nd charge on the home in order to reclaim back some of the equity I originally put into his business and home. I agreed to let him live in our home, but would want part of the sale proceeds that were due to me. We agreed on a split of 30/70 after all sale costs of the home were taken out. This left me with an amount of ?129,000 [30% areed split] which was paid to me in 2010. My question is: Does this money constitute receiving income, or is there a liability for me to pay CGT as I had bought other property as my main residence? . . .
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Buying property tax efficiently whilst your children are studying
07/12/2011
The slump in property prices will have made many people consider whether buying property for their children to occupy whilst at university is cost effective. However, given the currently low prices, if you're looking at the long term with perhaps other family members occupying the property and also renting it out to third parties it can still be a worthwhile investment. In this article we look at structuring such a purchase tax efficiently . . .
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Extending the nomination period for PPR relief with ESC D21 - USERNAME: charliebrown
Tax Question: Hi, just as a follow up to the PPR question for a non-dom client, thank you for your answer. I agree that the fact that they are resident in the UK for tax purposes makes it doubtful whether they could ever successfully argue by way of fact that the Spanish property was their main residence. I am therefore more inclined to think that they should make an election such that they can choose which property is treated as the main residence for UK capital gains tax purposes, and it would seem that ESC D21 would apply in this case on the basis that the taxpayer was not aware that an election needed to be made (as the UK property is only rented) and that the value of their interest in the UK property is negligible (on the basis that it is just rented). Would this seem appropriate? Many thanks. . . .
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PPR relief on overseas property - USERNAME: charliebrown
Tax Question: A non-dom client sold their Spanish property last year. In the process of computing the capital gain (which included a rather large forex gain due to the movement in exchange rates), the client has asked me to treat the Spanish property as their PPR. The client (of Spanish origin) is resident but non-domiciled in the UK for tax purposes, and rents a property in the UK which he uses as a base between "travelling" and spending time in Spain with family. When in Spain he resides in his Spanish house which is never let out and maintained for his sole use. The client is currently submitting tax returns on an arising basis. So he doesn't own the UK flat but from my understanding of HMRC guidance it would appear that he has an interest in the flat as a tenant, and therefore unless an election is made HMRC could treat the UK flat as his PPR with the result that PPR relief cannot be claimed on the Spanish house. Should therefore a late election under ESC/D21 be made (the Spanish property was bought over 6 years ago)? Many thanks for your help. . . .
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PPR relief on a flat - USERNAME: ellinor
Tax Question: I own my own home. When I sell it I know I won't have to pay capital gains tax. I also own an apartment, and have for many years, which I have let out for most (but not all) of that time. Can I get the private residence exemption on the apartment if I sell my house and move into the apartment as my main home, living there for many years (say 5+) before I sell it? Many thanks . . .
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Interactive Private Residence Relief Tool
31/08/2011
Qualifying for Principal Private Residence ("PPR") Relief can substantially reduce capital gains tax on the disposal of property or land. This interactive tool guides you through the rules relating to PPR relief to ensure you maximise your relief. Available for Gold Members Only. . . .
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PPR & Lettings relief on transfer of property between spouses
Tax Question: I am considering selling a flat which I purchased in 1998, the sale of which will generate a gain of circa £150k. Until mid-2010 I had let the property out but last August my wife and I moved into the property as our main residence and I wrote to HMRC to vary my PPR election, although they did not respond. We occupied the flat for 5 days a week, and returned to our house (previously elected as my main residence) at weekends. We lived in the flat from August 2010 until April 2011 and in May 2011 I again let it out for 6 months. While we were living in the flat I tranferred the ownership into joint names and remortgaged it in joint names. For CGT purposes, given that ownership was transferred while we were in occupation, will my wife's period of ownership begin on the day I purchased the flat so that 50% of the gain is hers? Will we both be entitled to 3 years PPR relief? Will we both be able to claim £40,000 letting relief i.e £80,000 in total or will the £40k be split with each of us qualifying for £20k relief? Many thanks. . . .
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Helping your children to buy their first property tax efficiently
01/08/2011
For a variety of reasons many adult children aren't able to get on the property ladder without some financial help from their parents. If you're considering ways to help your children buy their first home it's important that you consider the tax implications both for you and your children. In this article we look at ways to help your children purchase their first property tax efficiently . . .
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Buying property tax efficiently whilst your children are studying
