CG73924 - NRCG and the exemptions: Disposals from 6 April 2019: Residential property gains

For CGT purposes an additional consideration is whether the interest in land would give rise to a residential property gain because of the different CGT rate that may apply see CG73920.

The definition of what are residential property gains is within TCGA92/Sch1B.

In most cases what amounts to a residential property gain will be a straightforward matter.

TCGA92/Sch1B follows the same principles that were previously within Sch B1 (see CG73743).

TCGA92/Sch1B para 4 mirrors the definition of interests in UK land that are within TCGA92/S1C and also applies for the purposes of non-UK land.

To calculate what proportion of a chargeable gain is attributable to residential property the calculation is made on a time-apportionment using the fraction A/B.

• A is the number of days in the applicable period on which the land to which the disposal relates consists of or includes a dwelling
• B is the number of days in the applicable period (see below)

Various provisions in the non-resident CGT legislation deem that a “building” includes part of a building. This is necessary because there are differences in tax treatment between residential and non-residential property, but such property may be found within the same building.

In a case where there is mixed use the relevant fraction of the gain is adjusted on a just and reasonable basis to take account of the mixed use on the day or days.

As an example a building may comprise of a shop with a flat above. If the shop represented half of the building throughout the applicable period. In the A/B calculation, the numerator A should be adjusted to (A/2) / B

In individual cases it may sometimes be difficult to decide whether any particular part of a building should be looked at independently from other parts, or whether the building should be looked at as a whole. Such cases should be decided on their facts.

In some cases a building may become temporarily unsuitable for use as a dwelling. Such a temporary period is ignored and the building would continue to be treated as suitable for use as a dwelling.

An exception applies where the temporary unsuitability resulted from accidental damage and the building was unsuitable for use as a dwelling for a period of at least 90 consecutive days. But this exception does not apply if the damage occurred in the course of work being done to alter the building and involved or would be expected to involve the building becoming unsuitable for use as a dwelling for a period of at least 90 consecutive days. See para 6 Sch1B TCGA1992.

See also Para 7 for the rules that apply where the disposal is of a building that has undergone works.

Applicable period

The applicable period begins with the day on which the person making the disposal acquired the interest being disposed of, or if later the day from which the interest became chargeable. The period ends with the day before the day of disposal.

Example – Mr A has never been resident in the UK but acquired a residential property on 1 June 2009 which was disposed of on 24 April 2019. The applicable period would be 6 April 2015 to 23 April 2019.

If different interests in the land are acquired at different times the period would run from the earliest acquisition or if later, the date from which the interest became chargeable.