Week 9 Part 2

• A dwelling which is a taxpayer's only or main residence is known as the taxpayer's Principal Private Residence (PPR)​
• A taxpayer's PPR is generally not a chargeable asset for CGT purposes​
• Residence" implies permanency – a property occupied for only 32 days did not qualify as a PPR
• You do not pay Capital Gains Tax when you sell (or ‘dispose of’) your home if all of the following apply:​

  1. You have one home and you’ve lived in it as your main home for all the time you’ve owned it​

  2. You have not let part of it out - this include having a lodger​

  3. You have not used a part of your home exclusively for business purposes (using a room as a temporary or occasional office does not count as exclusive business use)​

  4. The grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total​

  5. You did not buy it just to make a gain​
• A taxpayer may have only one PPR at a time​
• A taxpayer who owns and lives in two or more residences should elect which property is his/her PPR. The election must be made within 2 years after the date from which it will take effect.​

  ​
• A married couple (or civil partners) who live together may have only one PPR between them​
• The requirement for actual residence does not apply if the owner lives in job-related accommodation​

  ​
• If a property has been occupied as a PPR for only part of​

  the period of ownership, only part of the gain arising on​

  disposal is exempt from CGT​

  ​

  The exempt part of the gain is:​ Whole Gain x Length of Period of residence/ Length of Period of ownership

  Periods of ownership or residence occurring before 31 March 1982 are ignored in this calculation​
• The final 9 months of ownership always count as a period of residence​
• Some periods of absence are deemed to be periods of residence for PPR purposes:​

  1. any time employed outside the UK (or living with a spouse or civil partner who is working in such an employment)​
  2. up to 4 years working elsewhere in the UK (or living with a spouse or civil partner who is working in such an employment)​
  3. up to 3 years for any reason given automatically​
• There must usually be a period of actual residence both before and​

  after the period of absence for it to count as a period of residence​

  except when the taxpayer is employed anywhere else in the UK or​

  abroad (and the taxpayer cannot claim any other property to be his/her​ PPR during that period)​
• If a PPR is used partly for business purposes, the gain attributable to the business part of the property is generally chargeable to CGT​

  But the usual exemption for the final 9 months applies to any part of a property which has been occupied at some time as the taxpayer's PPR, even if that part of the property is used for business purposes during those 9 months​
• If a part of PPR is let for residential purposes during periods of owner’s residence, the chargeable gain is reduced by letting relief

  The owner must live in the house and rent room (or rooms). If the owner is not living in the property during the rental periods, it is treated as a period of absence and not included in the PPR exemption. ​

  ​
• Letting relief is the lowest of:​

  1. the gain which arises by reason of the letting​
  2. the gain which is exempt because of the PPR exemption​
  3. £40,000​

  • It is obvious that this letting relief can never exceed £40,000​

  ​

  *Note: If it does not exceed 3 years and there was a residence before and after it, it might be treated as deemed residence based on the rule ‘three years of absence for no reason’.​