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How and when private residence relief can be claimed.

Private residence relief applies for capital gains tax purposes if the dwelling house or part of the dwelling house has been the individual’s only or main residence during some period of ownership.

If an individual owns more than one property, they may make an election. It is essential that the individual has actually lived in the property at some point and HMRC will often ask for proof of this in the event of an inquiry.

If during the period of ownership the dwelling house or part of the dwelling house has been used exclusively for some other purpose then the relief is reduced. If the property has been the individual’s principal private residence at some point, the last 36 months of ownership will be treated as if it was the individual’s only or main residence even if in fact it was not so used, for tax years up to and including 2013/14. This final period exemption reduced from 36 months to 18 months from 6 April 2014.

Let property relief

A further relief may be available where private residence relief is restricted because some or all of the dwelling has been let as residential accommodation (TCGA 1992 s223(4)). It must be noted, however, that let property relief only applies if the property has been the principal private residence of the individual at some point. 

Article extracted from ACCA “In Practice” Newsletter