CG64925 - Private residence relief: ownership period: spouses or civil partners and legatees
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S222(7)(a) & (b) TCGA92
For disposals on or after 6 April 2020, if a dwelling-house or part of a dwelling-house is transferred between spouses or civil partners of each other and who are living together, whether by sale or by gift, the period of ownership of the transferee is treated by s222(7)(a) TCGA92 as beginning at the beginning of the period of ownership of the transferor. This also applies where a dwelling-house is transferred from one to the other on a death.
This provision only applies for the purpose of computing private residence relief. It has no effect on the computation of the gain which arises on any disposal by the transferee spouse or by the transferee civil partner.
The following conditions must be fulfilled.
- The spouses or the civil partners must be living together, as defined by s1011 ITA07, see CG22070 at the date of the transfer. If the dwelling-house passes from one to the other on the death of either of them they must have been living together before the death of the transferring spouse or civil partner.
- The extended period of ownership is subject to the limit of s223(7) TCGA92 for the purpose of computing the relief due on any subsequent disposal, see CG64940 and CG64943.
- Where the disposal between spouses or civil partners living together was made before 6 April 2020, the dwelling-house must have been their only or main residence at the time of the transfer, or the date of death where a dwelling-house passes from one to the other on the death.
You should extend the transferee’s period of ownership of the residence to take in the period of ownership of the transferor. Additionally, you should allow relief to the transferee for any part of the extended period of ownership in which the property was the only or main residence of the transferor. An example is given below.
Example 1
Mr J and Ms M each owned a house when they married on 1 March 1995. After they married they used both houses as residences but, because Ms M’s house, which she purchased on 1 September 1990, was worth more, they nominated that house as the main residence (a married couple or civil partners who are living together can only have one main residence between them, s222(6) TCGA92, see CG64520).
Ms M died on 1 February 2015 and her house was transferred to Mr J at a probate value of £400,000. After his wife’s death Mr J moved out of the couple’s main residence and began to live only in the other residence he still owned. The former main residence remained empty until it was sold on 1 January 2021 for £380,000.
Mr J made a loss on the disposal of the house which is computed as follows.
| £ | ||
|---|---|---|
| Disposal proceeds | 380,000 | |
| Less | Cost | 400,000 |
| loss | (20,000) |
Because of private residence relief only part of the net loss will be an allowable loss, see CG65080+. The result of s222(7)(a) TCGA92 is that Mr J would take over his wife’s period of ownership of the property, see CG64950. Note that the effect of s223(7) TCGA92 is that the period of ownership for the purpose of computing relief cannot begin before 31 March 1982, see CG64940 and CG64943.
- Period of ownership 01.09.90 to 01.01.21 = 364 months
- Period of only or main residence 01.09.90 to 01.02.15 = 293 months
- Final period allowed by s223(2) TCGA92 = 9 months*
The relief is:
293 + 9 / 364 x £(20,000) = £(16,593)
The effect of the relief is to reduce the allowable loss to £3,047.
* For details of the different final periods where relief is due which are applicable for different dates of disposal see CG64985.
In some circumstances the extension of the period of ownership will not be to the advantage of the transferee as shown in the following example.
Example 2
Alison and Sue are civil partners and lived together in a house that Alison owned although she originally bought it as an investment property. When Alison died the house passed to Sue who continued to occupy it as her only residence for a period before selling it. Before Alison’s death the property was only used as the couple’s only or main residence for only part of her period of ownership. If we looked only at the use of the residence during Sue’s period of ownership there would be no restriction of relief. But extending the period of ownership brings into the computation of relief a period when the residence was not Alison’s only or main residence. In these circumstances relief is restricted.
Where the disposal between spouses or civil partners was made before 6 April 2020, the start of the transferee’s period of ownership begins at the start of the period of ownership of the transferor only where the dwelling-house was their only or main residence at the time of the transfer (or date of death where a dwelling-house passes from one to the other as legatee).
S62(4)(b) TCGA92
Under s62(4)(b) TCGA92, a legatee is deemed to acquire an inherited property on the date of death, see CG31140. Except where s222(7) TCGA92 applies the legatee’s period of ownership for private residence relief purposes begins on that date. In practice a legatee who wishes to use the property as a residence, but who was not already living there, may not be able to do so until a later date. In such cases the period from the date of death until the property begins to be used as a residence does not qualify for relief.