Establishing a property as a main residence in 2010
Principal Private residence ('PPR') relief exempts a proportion of the gain on a property, when the property disposed of has been the owners main residence.
Therefore to qualify for this relief two conditions need to be satisfied:
- the property must be occupied as a residence, and
- it must be the main residence
In order to be a residence you need to own an interest in the property. This can be either a freehold or leasehold interest - but not a licence.
Of key importance to many is how long it is necessary to occupy a property for before it can qualify as a residence/main residence. Residence is not defined in the legislation, however the Revenue expect a degree of permanence, therefore occupation for only a handful of days each year would not constitute residence. Whilst drawn from a different context (in connection with the availability of mortgage interest relief) a Revenue extra statutory concession suggests that a period of occupation of not less than three months is required to establish a property as the only or main residence. Whilst the MIRAS position is certainly influential it is not conclusive.
There are no hard and fast rules as to how long to occupy the property before it can be classed as a residence. Some commentators suggest occupying a property for a period of 12 months, although there is no fixed period set by the Revenue and they frequently refer to the 'quality' as opposed to the 'quantity'of the occupation. It is important to ensure that the residence is genuine. For example the property should be your registered address for the electoral register, and your employers should be informed of the new address
It's a matter of fact when a property is a residence, and a tax inspector will look at the whole circumstances surrounding the occupation of the property. The checklist below highlights some of the key factual issues to consider.
| Evidence to make a property a main residence | ||
| Yes | No | Evidence |
| Was MIRAS relief previously claimed for the interest on the mortgage? | ||
| Was the mortgage obtained on the basis of the property being the main residence? | ||
| Is the Property a freehold property? | ||
| Are the utility bills etc addressed to you? | ||
| Was there continuous and regular occupation of the property by you? | ||
| Was the house the family home? | ||
| Did your tax return/Revenue correspondence go to this property? | ||
| Did letters from your employer go to this property? | ||
| Did you work close to this property? | ||
| Are any bills for work etc billed to this property? | ||
| Is the property registered as your main residence with the local authority? | ||
| Was this property furnished with your furniture | ||
Of course for most people this won't even be an issue. They will own one property and this will be the main residence. What if they own two or more properties though? Well this is when you'd need to look at the matters as highlighted above to try and see which of the properties was the main residence.
If you've got a property that is let and you're looking to reduce the capital gains tax charge on the future disposal a popular option is to consider occupying it as a main residence. In this case it would then qualify for at least partial principal private residence ('PPR') relief as well as lettings relief.
If this applies to you you'd again need to consider the above and actually make sure it was your home for a suitable period (say 6-12 months +) prior to a disposal to ensure the property was a main residence.
About the Author
The Author of this article/answer is our site Editor, 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.
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