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Consultation on Private Residence Relief launched

Consultation on Private Residence Relief launched

HMRC launch a consultation on changes to Private Residence Relief.

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HMRC have launched a consultation on changes to Private Residence Relief, originally trailed in the Autumn Budget. The proposed changes will reduce the relief available on the sale of a home in some circumstances.
Under current CGT rules, an individual can claim relief for any period where the relevant property is occupied as the individual’s ‘Principal Private Residence’ (PPR), i.e., his/her main home. There are some periods where the property is deemed to be occupied even where the owner(s) may be absent from it.

One of these periods is the last 18 months of ownership of a PPR which is currently regarded as an exempt period even where the owner is absent from the property. In addition, where a PPR has been let out for some of the period of ownership, an individual can claim lettings relief of up to £40,000 which may reduce significantly the gain relating to a period the property is let. It is important to note this applies to each individual so lettings relief of up to £80,000 can be claimed in respect of a jointly owned property. Currently, the individual does not need to also live in the property at the time it is let.

HMRC have issued a consultation on proposed changes to both of these reliefs, and they propose to make the following two changes with effect from April 2020:

  • The individual will only be able to claim relief for the final nine months of ownership, reduced from 18 months; and
  • The individual will only be able to claim ‘lettings relief’ where the owner is in shared occupancy with the tenant.

The Government estimates that the calculation of gains on 40,000 property disposals per year will be impacted by these changes raising additional revenue of up to £150 million by 2023/24.

The Government is also considering changing the rules on inter-spouse transfers, so that the transferee spouse always inherits the transferring spouse’s period of ownership and the use to which the property was put during that time.

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