One area to consider is eligibility for private residence relief, commonly referred to as principal private residence (PPR) relief, which can either eliminate or reduce capital gains tax.
PPR relief may exempt all, or part, of a gain arising on a property that has been used as a home. A gain may arise if there have been periods of absence, or if more than one property is owned.
PPR relief is available following the disposal of, or interest in:
- All or part of a dwelling house which has at any time during the period of ownership, been used as the only or main residence of the person making the disposal or
- Land held for own occupation and enjoyment with that residence (i.e., the garden or grounds, up to a permitted area).
A loss made on disposal of a dwelling that fully qualifies for PPR is disregarded, meaning it is not possible to carry it forward or set it off against other gains.
A ‘home’ is where an individual lives and could encompass more than one property, in which case it is recommended that an election is made and notified to HMRC within two years of acquisition of the second home, although the nomination may be changed at a later date.
PPR is available for periods of ‘deemed occupation’, such as the final nine months of ownership, but can also include time spent living abroad for work, or other time away from the home, provided you return to the property.
Before sale, consideration should be given to whether a property interest should be gifted to a spouse or civil partner to make use of a capital gains tax annual exemption as a transferee would inherit the ownership period and property usage of the transferer.
A disposal of UK residential property may need to be reported to HMRC within 60 days of completion of the sale and tax is payable at that time. It is not sufficient to assume this can be dealt with via your Tax Return.
We can help guide you through the opportunities available to you and the reporting requirements.
If you have any queries and would like assistance please contact Diane Nettleton on 01633 643167 diane.nettleton@kilsbywilliams.com or Robert Harris on 01633 653180 robert.harris@kilsbywilliams.com Alternatively, please contact your usual advisor on 01633 810081 or email info@kilsbywilliams.com
