UK and International Tax news
CGT and Private Residence Relief Consultation
Tuesday 9th April 2019
HMRC has issued a consultation document inviting views on changes to CGT Private Residence Relief including lettings relief and the final period exemption which were announced in the 2018 Budget.
Where a person lets part of or all of their main residence, or former main residence, as residential accommodation, CGT lettings relief may apply so that the qualifying gain is not a chargeable gain to the extent that is the lowest of the amount of private residence relief already calculated, or £40,000, or the amount of the chargeable gain relating to the letting.
Private Residence Relief is designed to exclude from CGT those gains or losses that arise when a person sells or otherwise disposes of a dwelling that has been used as their only or main residence. It only applies to that part of a dwelling that has been used as the owner’s only or main residence. A part of a dwelling that has always been separately let and exclusively used by a tenant or tenants would not qualify for PRR.
This relief is supplemented by ancillary reliefs that aim to deal with other situations where imposing CGT would lead to undesired outcomes. In particular, where a property is or has been occupied as the owner’s only or main residence, the final 18 months of their period of ownership always qualifies for PRR, regardless of the property’s use. This period is extended to 36 months for persons who are disabled or resident in a care home.
In the 2018 Budget, the government announced that two of the ancillary reliefs would change to better target PRR at owner-occupiers, in particular:
- the final period exemption will be reduced from 18 months to 9 months, although the special rules that give those with a disability and those in care an exemption of 36 months will not change.
- lettings relief will be reformed so that it only applies where an owner is in shared occupancy with a tenant.
These changes will take effect from 6 April 2020.
The consultation sets out the government’s proposed changes in more detail and invites views, on how they will work in practice and on some technical aspects of the PRR rules, by 1 June 2019.