Can I rely on the PRR allowances on gov.uk website?

[CGT Newbe]

Hi all. I can't work out if I may rely on any of the following PRR allowances identified on www.gov.uk website.

"You’ll also get relief for the first 12 months you owned the home if both the following apply: •it was being built, renovated or you couldn’t sell your old home •you lived in it as your only or main residence at the end of the 12 months".

"You get relief if you were away from it for: •any reason for periods adding up to 3 years •up to 4 years if you had to live away from home in the UK for work •any period if you were working outside the UK". You must have lived in the home before and afterwards, unless your work prevented you.

So in light of the above and based on the following the exam question is what is my qualifying residence fraction for PRR calculation? a) 138/140 months, b) 54/140 months, c) 42/140 months or d) some other ratio?

1. I bought a flat as my home in Feb 2007 for £185k.
2. I renovated/improved the property when I first moved in. Renovation costs = £15k and I have all receipts and council building notices and building regs approval docs/certs to certify works.
3. After 2 years I got a new job out of area. I couldn't sell my flat due to credit crunch. New job too far away to commute daily.
4. Flat was rented out in Feb 2009 and I moved into lodgings nearer my new job. This is the status quo. I now want to sell my flat to buy a new home near my work.
5. Sale at £325k with assumed completion date October 2018.

So which of the following is my qualifying residence fraction for PRR?

a) 138/140. Made up as follows: 24 months residence + 18 months deemed + 36 months (any reason for periods adding up to 3 years) + 48 months (up to 4 years if you had to live away from home in the UK for work) + 12 months (property being renovated during first 12 months and I lived in property both during and after renovations complete).

b) 54/140. Made up as follows: 24 months residence + 18 months deemed + 12 months (property being renovated during first 12 months and I lived in property both during and after renovations complete).

c) 42/140. Made up as follows: 24 months residence + 18 months deemed.

d) Some other ratio, please advise.

Once I know what my qualifying residence ratio then we can discuss any applicable lettings relief and work out my final bill

Many thanks
Peter

[CGT Newbe]

In case my post was too wordy then in brief, does anyone know when the criteria listed in the gov.uk PRR guidance for renovations, living away from home etc apply? I haven’t seen anyone refer to these items in any of the cgt calcs discussed?!

[wamstax]

Possibly the reason nobody replies is that it looks like tax student homework cheat

[CGT Newbe]

Lol actually I’m a 50yo chartered aeronautical engineer who made the mistake it seems of wordsmithing his cgt query clearly.

In case there are any tax students out there I called the HMRC this morning who very kindly talked me through the whole calculation and the answer to my ‘exam question’ was that none of the PRR allowances are relevant in my case as a) In effect I have received the 12months renovation relief when I moved into the property on day one, and b) none of my time working away from home in lodgings etc qualifies under the periods of absence items a or b in HMRC Form HS 283.

I’ve read this several times now and I still think I should be able to rely on the 3 year and 4 year allowances but who am I to question the HMRC.

Does anyone disagree with what I have been told by the HMRC and if so would appreciate hearing why as that could substantially reduce my final bill.

Best regards.

[wamstax]

To assist I would say that the reliefs you mention are intended for “temporary” absences from your otherwise owner occupied property so that you in fact return to the property after such an absence -with the quality of occupation after the absence being a further period of PRR

Additionally you can’t double count the same period for different reliefs where it already qualifies under another relief

[CGT Newbe]

Hi wamstax. Thanks for the help, much appreciated. Although interestingly HS283, extract below, suggests the allowances might apply even if you don't return?! See light blue below. I take your point on concurrent allowances though. So now I am thinking in addition to my actual (24mths) plus deemed (18mths) residence would alarm bells go off if I claimed an additional 4 years on the basis that the distance from my place of work prevents me from living at home? See dark blue below.

Peter


The qualifying periods of absence are:
a. absences for whatever reason, totalling not more than 3 years in all
b. absences during which you’re in employment and all your duties are carried on outside the United Kingdom (UK)
c. absences totalling not more than 4 years when
•the distance from your place of work prevents you living at home, or
•your employer requires you to work away from home in order to do your job effectively
You’ll keep the exemption for absences b. and c. if you cannot return to your dwelling house afterwards because your existing job requires you to work away again. The absences at b. and c. will also apply if the employment was that of your spouse or civil partner.

[bd6759]

The question is whether the situation regarding your place of work prevented you from returning.

s223(3B) TCGA "...the individual was prevented from resuming residence in the dwelling-house in consequence of the situation of the individual's place of work..."

The relief is to cover absences, and is extended to cover situations where the absence becomes permanent. If your job was a fixed term appointment, that was subsequently extended, you would have an allowable period of absence up until the date the job was was extended and it became clear you would not return.

There is an example here: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65067