Private residence relief

By Tolley
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The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Private residence relief
  • Conditions for relief
  • Restrictions to the amount of relief
  • Letting relief
  • More than one residence
  • Non-UK resident trusts and beneficiaries
  • Is the beneficiary entitled to occupy the property?

Conditions for relief

The gain on the sale of a residential property (together with its grounds) held in trust will be wholly or partly exempt if, during the period of ownership by the trustees:

  • the property has been occupied by a beneficiary of the trust as his or her only or main residence, and
  • the beneficiary in question is entitled to occupy the property under the terms of the trust (discussed at the end of this note)

TCGA 1992, s 225

A similar relief is available on the disposal of a property by the personal representatives of a deceased person. See ‘Capital gains made by personal representatives’ from the Income tax and capital gains tax during administration guidance note.

TCGA 1992, s 225A

The relief is only available to trustees if a claim is made. It does not apply automatically as with individuals. A claim must be made within four years of the tax year in which the disposal occurred.

So-called principal private residence (PPR) relief is an exemption rather than a relief. Accordingly, any loss to which the exemption applies is not an allowable loss, just as any gain is not a taxable gain.

Restrictions to the amount of relief

If a gain arises, the relief is calculated in the same manner as that for individuals, except that conditions relating to the occupation of the residence apply to the beneficiary. Therefore, where a property has been occupied, throughout the period of ownership by the trustees, by a beneficiary entitled to occupy it under the terms of the trust, the gain will be fully exempt. As for individuals, the relief may be restricted if:

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