Private Residence Relief (PRR) and Lettings Relief
It is of course possible to sell property and not have a chargeable gain in excess of the CGT annual exempt amount, in which case there would be no requirement to report the sale. This could be the case where either the property has not increased in value, the gain was covered by the losses brought forward from the previous years, or the gain is wholly or partly covered by a relief such as PRR or Lettings Relief.
The main idea behind PPR relief is that CGT is not payable for the period in which you live in the property as your main residence, with further relief available at the end of the period of ownership regardless of occupancy. However, PRR and Lettings Relief have recently undergone significant changes:
- The period eligible for PRR on qualifying properties at the end of ownership is now nine months compared to the 18 months, which applied prior to 6 April 2020. For defined categories of individual, the final 36 months of ownership may still qualify for relief.
- Lettings Relief is now restricted to periods where you (the homeowner) are in ‘shared occupancy’ with a tenant. This effectively excludes you from relief periods where you do not live in the property and are letting to a third party.
It’s important to note that the garden or grounds of a dwelling house may also qualify for PPR. Where the area of garden or grounds (including the site of the house) does not exceed 0.5 hectares, relief is automatically available for the whole area.
In some cases, PPR may be available for grounds larger than 0.5 hectares, provided that the area is required for the reasonable enjoyment of the property as a private residence. In such cases, HMRC expects you to disclose the scope of relief on your tax return. It will strengthen your case by exhibiting comparable properties in terms of the size and value of the house and buildings, the ratio of those gardens, and the nature of the property’s location. Specialist land agents are used to assembling the required comparisons in support of a claim for tax relief.