CG65670 - Private residence relief: dependent relative: at 5 April 1988: conditions

For disposals on or after 6 April 1988, relief is available if

· the dwelling-house was acquired before 6 April 1988, and

· at some time since its acquisition and before 6 April 1988 it was occupied as the sole residence of a dependent relative, and

· the other conditions for relief are satisfied.

Where the gain on a disposal qualifies for this transitional relief the following periods will qualify:

· any period before 6 April 1988 in which the dwelling-house was the sole residence of a dependent relative;

· any period after 5 April 1988 in which the dwelling-house was the sole residence of the dependent relative who occupied it on that date;

· the final period of ownership allowed by s223(2) TCGA92, see CG64985+.

A period of occupation as the sole residence of a dependent relative which begins on or after 6 April 1988 does not qualify. This is illustrated by the example at CG65681.

This limitation to dependent relative relief was introduced in the 1988 Finance Act and, in effect, closes the class of qualifying properties at 5 April 1988. To have simply abolished the relief at that time would have been unfair to any person who had incurred the expense of provided a dwelling-house to a dependent relative in the expectation that relief would be due. Relief will continue to be due to anyone who had provided a dwelling-house to a dependent relative before 6 April 1988 in respect of that dwelling-house as long as it is occupied by that dependent relative. So to that extent, dependent relative relief can still arise after 6 April 1988.

But no new houses can qualify for the relief in respect of the occupation by a dependent relative after 6 April 1988. Houses which already qualify because of occupation by a dependent relative before 6 April 1988 cannot qualify for a period after that date as a result of occupation by a different dependent relative.

Example

E acquired a dwelling-house in April 1978 and sold it in April 1992 realising a gain of £60,000 before private residence relief. The house was let from April 1978 to March 1981 and then occupied rent free and without any consideration as the sole residence of

· E’s widowed mother from April 1981 to March 1989 when she died, and

· E’s widowed mother-in-law from May 1989 to April 1992 when the house was sold.

The private residence relief due in accordance with s226 TCGA92 is computed as follows:

· in view of s223(7) TCGA92 (see CG64940) the period of ownership is 31 March 1982 - March 1992 = 120 months

· period of sole residence of E’s widowed mother is 31 March 1982 - March 1989 = 84 months

· final period allowed by s223(2) TCGA92 at the time of disposal = 36 months (see CG64985+)

The relief due is:

((84 + 36)/120) x £60,000 = £60,000

The gain arising is wholly relieved.