Private residence relief

By Tolley
Private residence relief

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 aresidential 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 abeneficiary 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 aproperty by the personal representatives of adeceased person. See the Capital gains tax during administration guidance note.

TCGA 1992, s 225A

The relief is only available to trustees if aclaim 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.

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

Restrictions to the amount of relief

If again 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 aproperty has been occupied, throughout the period of ownership by the trustees, by abeneficiary 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:

  • part of the property has not been used as aresidence
  • the property as awhole extends to more than half ahectare and the grounds extend

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