Private Residence Relief: Are Your Periods of Absence Eligible?
Private Residence Relief (“PRR”) provides a relief from Capital Gains Tax (“CGT”) on the sale of a property which is or has been your only or main residence at some point during your period of ownership.
Generally, if the property was your only or main residence for part of your ownership, only this part is relieved from CGT (in addition to the last 9 months of ownership which is treated as ‘deemed occupation’ in any case).
However, there are also some specific instances where an absence from your only or main residence may still be eligible for PRR.
Absences from a property and deemed occupation
If you have lived in a property at some point as your only or main residence, you leave the property to live elsewhere, and then later return to use the property as your only or main residence again, there are some circumstances when the period of absence may be classed as ‘deemed occupation’ when calculating your eligibility for PRR.
The instances where this may apply are as follows:
- You are abroad by reason of your employment (unlimited time period);
- You are absent from the property as a result of working elsewhere, either as an employee or a self-employed trader (up to a maximum of four years);
- You are absent from the property for any reason up to a maximum of three years.
A period of absence would also be treated as deemed occupation if you are living with your spouse/civil partner who meets either condition 1 or 2.
These periods of deemed occupation apply cumulatively, which means that there could be a longer period of deemed occupation if two or more periods are added together.
It should be noted that these periods will only be classed as ‘deemed occupation’ if you do actually return to living in the property as your only or main residence after the period of absence. If you do not, then the relief will not be available unless you meet either condition 1 or 2 and are unable to reoccupy the property because the situation of your place of work or the terms of your employment require you to work elsewhere (there are some complexities regarding these conditions, so expert tax advice should be taken to ensure you qualify).
If you have been absent from your property for the above reasons, this could be a very valuable consideration when calculating your eligible periods for PRR and your corresponding CGT liability, possibly even reducing this to nil.
Delay in taking up residence
For disposals on or after 6 April 2020, PRR may be available if you do not move into the property straight away.
PRR may be available if:
- you move into the property within 24 months of the start of your ownership and it becomes your only or main residence at that point; and
- during the period beginning with the start of your ownership and the date that you move in, the property was not the residence of another person; and
- during the period beginning with the start of your ownership and the date that you move in, a qualifying event occurs.
A qualifying event is:
- the completion of the construction, renovation, decoration or alteration of the property; or
- the disposal of a property that immediately before the disposal was the individual’s only or main residence.
The above rules can be found in the legislation at TCGA 1992 s.223ZA. For disposals prior to 6 April 2020, the relevant rules were contained in the Extra Statutory Concession (“ESC”) D49.
The rules in relation to calculating eligible periods for PRR can be complex – contact us now to make sure you are claiming your maximum entitlement and we will make sure that you are not paying more tax than is necessary.