Interaction between CGT exemption due to absence and letting during the absences

[Pawsoffitsmine]

I am preparing the CGT calculations on the sale of a dwelling house for a 2017-18 Self Assessment return. Can you please clarify the interaction (if any) between CGT exempted periods on account of absences and the declaration of rented periods during the absences.

If a Private Residence is exempted from certain years’ CGT on account of the owner’s absences (section 223 of TCGA 1992) and the property is rented out during some of those absent years, do these lettings ‘undo’ the absent years’ PRR exemption from CGT? The home owner rents accommodation elsewhere while absent.

The answer is not clear to me. Does anybody know – and, even better, can point me to the HMRC manual or relevant legislation?

I ask this because I gain confidence from the fact that a Private Residence, even if rented out in the final 18 months of ownership, remains 100% totally exempt from CGT for those 18 months.

[AdamS93]

PPR takes priority over letting relief.

You cannot get PPR and Letting Relief for the same period (i.e. most commonly the last 18 months of ownership will been deemed occupation even if let for this period).

[SteLacca]

My own view is the S223(4) brings the period of the let into charge in preference to any exemption under 223(3), and then allows letting relied accordingly.

[maths]

Assuming the period of absence conditions are satisfied then gains attributed to such periods of absence are exempt from CGT; this applies whether or not during these periods the property is let.

Lettings relief is available for periods in relation to which gains would otherwise be chargeable to CGT but are not then taxed if the lettings relief conditions are satisfied for those periods.

The above order follows from a careful reading of TCGA 1992 ss222 and 223.

[etf]

The following is lifted from an exam training manual:

Lettings relief is available where a dwelling house has been let as residential accommodation during a period of absence. Lettings relief is only available during periods when the property is not either actually occupied or deemed to be occupied by the owner. As a result, PPR relief will always take priority over lettings relief TCGA 1992, s223(4).

[maths]

For what it’s worth I think the legislation on the point is pretty clear.