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

TCGA92/S222 (7)

If a dwelling house or part of a dwelling house has been used as its owners 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) 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 1983 on a weekly tenancy. He incurred no capital expenditure. On 1 December 1986 he acquired the freehold in the property for £40,000. On 1 June 1988 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 1993 he sold A for £200,000.

His gain on the disposal of A is computed as follows

PRIVATE RESIDENCE RELIEF

• period of ownership 1.12.86-1.1.93 = 73 months
• period of only or main residence 1.12.86-1.6.88 = 18 months
• final period allowed by Section 223(2) = 36 months

The chargeable gain is £37,646 before the 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+.