Capital Gains Tax and Private Residence Relief

We encounter many queries in relation to Capital Gains Tax. In particular Private Residence Relief is a topic which is frequently raised.

In this blog we cover just a few aspects on the availability of Private Residence Relief.

When you sell your dwelling house you would normally be entitled to full relief against any capital gain arising on the sale provided that all of the following apply:

• The house has been your only or main residence throughout your period of ownership;
• You have not been absent, other than for certain permitted periods of absence, during your period of ownership;
• The garden or grounds including the buildings on them do not exceed 0.5 hectares;
• No part of your home has been used exclusively for business purposes during your period of ownership.

Whilst this is therefore something that many of us encounter at some stage in our lives, complexities can arise in less straightforward circumstances, where all of the above conditions are not met and it is more difficult to determine the extent to which Private Residence Relief is available.

Partial Relief

If you have not met all of the conditions throughout the whole of your period of ownership, for example you have only lived in the house for part of your period of ownership, then you may be entitled to partial relief.

Spouses/ Civil Partners

If you are married or in a civil partnership and you are not separated from your spouse or civil partner, then you can only have a single main residence between you.

Only or main residence

If you have more than one house which you occupy as a residence, the question as to which is your main residence is decided on the facts, unless you have made an election nominating which residence is to be treated as your main residence for any period. If making an election, this must be submitted within 2 years of the date you first have more than one residence. A new election can be made if there is a change in the combination of your residences.

Dwelling-house acquired for resale at a profit

You are not entitled to Private Residence Relief if, for example, you acquire a property for the purpose of realising a profit on sale.

Who is entitled to Private Residence Relief?

As an individual you are normally entitled to Private Residence Relief on any gain arising on the sale of your only or main residence.

It is also possible for Trustees of settled property and personal representatives of deceased estates to claim Private Residence Relief in specific circumstances.

The trustees of a settlement may claim Private Residence Relief where they sell a house which, during their period of ownership, has been the only or main residence of a beneficiary entitled to occupy the house under the terms of the settlement. It is important to note, however, that where the relief applies to a settlement this is not automatically received and must instead be claimed by the trustees.

Personal representatives may also claim Private Residence Relief on the sale of a house in a situation where, immediately before and after the passing of the deceased, the house was the only or main residence of one or more of the legatees and the legatee or legatees concerned would be entitled to at least 75% of the net proceeds from the sale of the property, but on the assumption that none of the proceeds is needed to meet the liabilities of the estate. Personal representatives are required to claim the relief where this applies.

Who to talk to for further advice

Our Wills and Probate team include STEP qualified and Chartered Tax specialists who welcome anyone who may require advice on tax issues. For a free initial consultation contact our friendly client focussed team via our website, telephone (01761414646) or email to enquiries@th-law.co.uk.