CG64930 - Private residence relief: ownership period: qualifying for relief

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S222(7) TCGA92

If a dwelling-house or part of a dwelling-house has been used as its owner’s only or main residence at any time in the period of ownership, any gain on disposal of the dwelling-house or that part of the dwelling-house will qualify in principle for relief.

Under s222(7) TCGA92, where different interests are held at different times the period of ownership begins at the date of the first acquisition on which expenditure is incurred which would have been deductible in computing any gain. For example, a person first occupies her residence paying rent under a tenancy, but incurring no capital expenditure. She then later buys the freehold. Her period of ownership begins with the acquisition of the freehold.

Example

An individual occupied residence A as his only residence from 1 March 2011 on a weekly tenancy. He incurred no capital expenditure. On 1 December 2014 he acquired the freehold in the property for £100,000. On 1 June 2016 he acquired a second property, B, and began to use both properties as residences. He nominated B as his only or main residence within the time allowed by s222(5) TCGA92, see CG64495. On 1 January 2021 he sold A for £250,000.

His gain on the disposal of A is computed as follows:

Action Description Amount (£)
- Disposal proceeds 250,000
Less Cost 100,000
- Net gain 150,000

PRIVATE RESIDENCE RELIEF

  • period of ownership is 01.12.14 - 01.01.21 = 73 months
  • period of only or main residence is 01.12.14 - 01.06.16 = 18 months
  • final period allowed by s223(2) TCGA92 (see CG64985) = 9 months

Relief: 18 + 9 / 73 x £150,000 = £55,480

The chargeable gain is £94,520 (£150,000 - £55,480) before the annual exempt amount.

TCGA92/S222 (7) {#}

If a dwelling house or part of a dwelling house has been used as its owner’s only or main residence at any time in the period of ownership any gain on disposal of the dwelling house or that part of the dwelling house will qualify in principle for relief.

Under TCGA92/S222 (7) where different interests are held at different times the period of ownership begins at the date of the first acquisition on which expenditure is incurred which would have been deductible in computing any gain. For example, a person first occupies her residence paying rent under a tenancy, but incurring no capital expenditure. She then later buys the freehold. Her period of ownership begins with the acquisition of the freehold. An example of this is given below.

An individual occupied residence A as his only residence from 1 March 2003 on a weekly tenancy. He incurred no capital expenditure. On 1 December 2006 he acquired the freehold in the property for £100,000. On 1 June 2008 he acquired a second property, B, and began to use both properties as residences. He nominated B as his only or main residence within the time allowed by TCGA92/S222 (5), see CG64495. On 1 January 2013 he sold A for £250,000.

His gain on the disposal of A is computed as follows

Action Description Amount (£)
- Disposal proceeds 250,000
Less Cost 100,000
- Net gain 150,000

PRIVATE RESIDENCE RELIEF

  • period of ownership 1.12.06 - 1.1.13 = 73 months
  • period of only or main residence 1.12.06 - 1.6.08 = 18 months
  • final period allowed by Section 223(2) = 36 months *

Relief: 18 + 36 / 73 x £150,000 = £110,959

The chargeable gain is £39,041 before the annual exempt amount.

* If residence A had been disposed of on or after 6 April 2014 the final period exemption would be limited to 18 months see CG64985.