CG64945 - Private residence relief: ownership period: applying kink test
An individual bought house G in June 1979 for £15,000. She
occupied it as her only residence until 1 May 1985 when she bought
a second residence, house H. She nominated house H as her main
residence within the time allowed by TCGA92/S222 (5), see CG64495.
She sold house G on 1 October 1992 for £130,000. She has not
made an election under TCGA92/S35 (5) but it is agreed that the
value of house G at 31 March 1982 was £30,000.
The gain on house G is computed as follows.
| £ | ||
| Disposal proceeds | 130,000 | |
| less | Value at 31 March 1982 | 30,000 |
| Unindexed Gain | 100,000 | |
| less | Indexation 30,000 x 0.761 | 22,830 |
| Net Gain | 77,170 |
Gain on historic cost
| £ | ||
| Disposal proceeds | 130,000 | |
| less | Cost | 15,000 |
| Unindexed Gain | 115,000 | |
| less | Indexation 30,000 x 0.761 | 22,830 |
| Net Gain | 92,170 |
The result of the `kink test', see CG16730+, is that the gain of
£77,170 is the gain from which private residence relief will
be deducted.
Private residence relief
For either computation the period of ownership for the
purpose of computing relief is treated as beginning at 31 March
1982. So the relief will be
- Period of ownership 31.3.82 - 1.10.92 = 126 months
- Period of only or main residence 31.3.82 - 1.5.85 = 37 months
- Final period allowed by Section 223(2) = 36 months
| The relief is | 37 + 36 | x 77,170 | = | 44,710 |
| 126 |
The chargeable gain will be £32,460 before annual exempt
amount.
NOTE. If a taxpayer is within the charge to Capital Gains
Tax, neither indexation allowance nor taper relief apply to
disposals of assets on or after 6 April 2008. Previously indexation
allowance had been frozen at April 1998. For indexation allowance
see CG17207+ and for taper relief see CG17895+.
