UK Private Residence Relief

If you have recently moved to the UK and intend selling your home in Ireland, please be aware that even if you qualify for Principal Private Residence Relief under Section 604 TCA 1997 in Ireland you may not qualify for UK Private Residence Relief.

This article is aimed at individuals who have become UK resident and who are in the process of selling their Irish principal private residence.

In general, you do not pay Capital Gains Tax when you sell or ‘dispose of’ your home if all the following conditions apply:

• you have only one home and you’ve lived in this property as your main home for the entire time you’ve owned it
• you have not let part of it out (Please be aware that this does not include having a single lodger)
• you have not used part of the property for business purposes only
• the grounds, including all buildings, are less than 5,000 square metres in total
• you did not buy the property with the sole or main intention to make a gain

If all the above conditions apply you will automatically get a tax relief called Private Residence Relief.

Your period of ownership begins on the date you first acquired the dwelling house or on 31st March 1982 if that is the later date. It ends when you dispose of or sell the property.

The final 18 months of your period of ownership will always qualify for Private Residence Relief regardless of how you use the property during that time but providing the property has been your only or main residence at some point.

The following periods of absence are treated as periods of occupation for the purposes of calculating Private Residence Relief:

• Any periods of absence, for whatever reason, not exceeding three years in total
• Any period of absence when carrying out the duties of your employment outside the United Kingdom
• Any periods not exceeding four years in total which are due specifically to employment requirements.

In order for these periods of absence to qualify as “deemed occupation” there must be a time both before and after the absence when the dwelling house is the individual’s sole or main residence. It is important to keep in mind that absences due to the conditions of an employment will qualify for the Relief even if the individual does not return to the dwelling house afterwards provided the reason for not their returning is due to their contract of employment requiring them to live somewhere else.

Any period of absence which requires the individual to live in job/work related accommodation will qualify for Private Residence Relief if there is an intention to occupy the dwelling as a main residence at some point.

HMRC will, by concession, allow a period of up to one year before the individual begins to occupy the property as his/her principal private residence to be treated as a period of occupation provided the property is then occupied as his/her only or main residence. In exceptional cases, HMRC may extend this period to two years.

From April 2015, the PRR rules were amended so that a property may only be treated as an individual’s main or sole residence for a tax year where that person or his/her spouse/legally registered partner has either:

(a) been tax resident in the same country as the property for the tax year in question (For further information on residence rules please follows this link:  https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability/guidance-note-for-residence-domicile-and-the-remittance-basis-rdr1) or

(b)  has stayed overnight in the property at least 90 times in that UK tax year.  Time spent in another property owned in the same jurisdiction/country can also be included in the ninety day count so that the total number of days in all properties in the territory in question are added together.

The new rules apply equally to a UK resident individual disposing of an overseas home as well as to a non-UK resident disposing of a home in the United Kingdom.

Finally, Lettings Relief may be available in circumstances where Principal Residence Relief is restricted because all or part of a property has been rented out.

This Relief is particularly important for individuals who, due to the current economic climate, experience difficulty selling their former home and, as a result, find they need to rent it out while they’re trying to sell it.

A maximum gain of £40,000 per owner is exempt from Capital Gains Tax provided that property has at some time been the main or only residence of the owner.

From 6th April 2020 there will be a change to this Relief whereby Lettings Relief will only be available in situations where the owner shares occupancy with the tenant.