CG64470 - Private residence relief: only or main residence: an interest in a dwelling-house is a requirement

An individual must have an interest in a dwelling-house used as his residence for it to be a residence within the meaning of s222 TCGA92. This is because relief is available on the disposal of, or of an interest in a dwelling-house or part of a dwelling-house. Therefore, when considering which of an individual’s residences is their main residence for the purpose of private residence relief, it is only necessary to consider those in which that individual has an interest.

An interest in a dwelling-house means a legal or equitable interest. It includes all possible forms of ownership from owning the freehold to being the co-owner of a minimal tenancy. In most cases, where a residence is rented a tenancy exists, and such residences therefore remain within s222.

The only circumstance in which an individual can reside in a dwelling-house in which he or she has no legal or equitable interest is where the property is occupied under licence. A licence is a permission to reside in a property which may be contractual or gratuitous. For instance, staying in a hotel or in lodgings are examples of residence under contractual licence. And staying with family or friends is an example of residence under gratuitous licence.

An individual’s only or main residence may be in a home in which they have no interest. Where an individual occupies their main residence under a licence but they also reside in another dwelling-house in which they have an interest, the residence in which they have an interest will be the only or main residence for private residence relief. This is because the word residence within s222 TCGA92 only refers to residences in which the individual owns an interest.

The question of whether or not a dwelling-house is a residence within the meaning of s222 TCGA92 may become important where an individual has one or more other residences. This is because where there is more than one residence the individual is able to nominate, within set time limits, which is to be treated as the main residence, see CG64485. By doing this the individual can ensure that the residence which is treated as their main residence is the one on which a gain is more likely to accrue. In certain circumstances the time limit for making such a nomination may be extended. This was by virtue of ESC D21 which is now incorporated in s222(5A), see CG64500.