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A form of ‘reinvestment relief’ is available in situations where ownership of property is swapped or is changed from joint ownership to each owning their specific part.

A significant exception to this relief is if any of the properties is, or has at any time been, a Principal Private Residence (PPR) of one of the owners or later becomes their PPR, such that a disposal within the next six years following exchange is eligible for PPR relief to any extent.

However, if all of the properties involved in the exchange become solely owned PPRs of their respective individual owners then the reinvestment relief may still apply. (Married couples count as ‘sole’ owners in this context.)

The ‘main residence problem’ is that this ‘exception to the exception’ applies only if all parties’ properties are their respective main PPR.

Example:
Susan and Sharon jointly own two cottages, each living in one as their main PPR. They exchange interests such that Susan’s house becomes the PPR of Sharon and vice versa. As no money has changed hands, the ‘reinvestment relief’ will apply and no CGT will be charged.

However, if Susan had lived in her cottage as her main PPR but Sharon’s main PPR was another property, the ‘relief’ would not be available.