PPR relief "a period of absence not exceeding 3 years"

[Incredulum]

s223 (3) provides various reliefs for periods when one is not living in a property. And they are much beloved of examiners writing professional exams.

(3)For the purposes of [sections 222(5) and 222A and] subsections (1) and (2) above—
(a)a period of absence not exceeding 3 years (or periods of absence which together did not exceed 3 years), and in addition
(b)any period of absence throughout which the individual worked in an employment or office all the duties of which were performed outside the United Kingdom [or lived with a spouse or civil partner who worked in such an employment or office], and in addition
(c)any period of absence not exceeding 4 years (or periods of absence which together did not exceed 4 years) throughout which the individual was prevented from residing in the dwelling-house or part of the dwelling-house in consequence of the situation of his place of work or in consequence of any condition imposed by his employer requiring him to reside elsewhere, being a condition reasonably imposed to secure the effective performance by the employee of his duties, [and in addition,]
[(d)any period of absence not exceeding 4 years (or periods of absence which together did not exceed 4 years) throughout which the individual lived with a spouse or civil partner in respect of whom paragraph (c) applied in respect of that period (or periods),]shall be treated as if in that period of absence the dwelling-house or the part of the dwelling-house [were occupied by the individual as a residence] [if conditions A and B are met.]

Which is all very lovely. But how does one actually access that relief? Almost certainly, unless alternative accommodation is provided by an employer, one will have an 'interest' in another dwelling at that point even if just a lease, which I think will preclude one from accessing this relief. If one is provided with job-related accommodation then one automatically obtains relief for an indefinite period anyway. Does the relief only apply if you aren't living in a dwelling-house - so, say, a yacht or hotel? There is a good example here which pretty much suggests this.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65065

Thanks.

[maths]

TCGA 1992 s 223(7) was always a bit of a dog's breakfast requiring that there was no residence which qualified as a residence in addition to the residence from which the absence occurred.

Inevitably whilst away there would be a second residence in most cases which meant that the period of absence conditions could not be met.

HMRC adopted a pragmatic stance which was that the taxpayer is assumed to have two residences for there same period and hence an election should be made in favour of the home normal residence (HMRC accepting somewhat contradictorily that the home residence was not de facto a residence whilst the taxpayer was absent from it).

The period of absence conditions are deeming and thus they applied automatically if the conditions are satisfied; no claim was thus necessary.

Therefore it wasn't necessary to live on a boat or in a tent on the back of a camel.

The bit of s233 which was problematic was repealed in from memory by FA 2015 and no longer appears in s233.

[Incredulum]

Thank you Maths, that's very helpful indeed. I noted that the section had been extensively rewritten since the last time I had been there. A perverse result from a peculiar piece of legislation.

Individual lives in London and has a holiday cottage in the country that is let as FHL mostly short term, with occasional longer lets during the winter, and is sometimes occupied by Individual. Both properties have been owned for a long time and no election has ever been made.

Individual has been offered an "insane" quantity of money for a 3 month rental of London house. London being London, the CGT bill accruing for being away from the PPR is a very significant proportion of this "insane" sum and therefore makes it less attractive.

Individual proposes to skip between holiday cottage (if vacant - currently on a 3 month Covid-special rent; Covid is all 'off season', right?), and sofa surfing. Do you therefore consider, from what you have written, that it is possible to make an election in favour of London at the point that Individual moves out of the London house and (potentially) into holiday cottage?

Thank you.

[maths]

It seems unlikely that the "holiday cottage" at present will qualify as a residence and, going forward, unless it is occupied regularly and not rented out it still won't qualify.

In which case no election is possible as only one (London) residence.

If on moving out of London the holiday cottage did become a residence and the London property continued as a residence then an election would need to be made (presumably in London's favour). But not sure what this achieves.

An absence of 3 months from London property is unlikely to prevent residence relief on sale applying to this time period. If, however, this wasn't the case (ie not classified as a residence for the 3 months) the "period of absence" relief should apply to the 3 months.

[wamstax]

What about the condition that The election must be made within 2 years of your combination of properties changing?

[maths]

Warmstax

Agree that any election must be made within 2 years of two residences arising but not sure this helps?

[wamstax]

No I was meaning it could stymie an election

[Incredulum]

Thanks wamstax. I think Maths is arguing that the action of moving out of London gives rise to a change of combination.

The perverse bit being that this new combination (i.e. not living in London) permits an election in favour of London?

An absence of 3 months from London property is unlikely to prevent residence relief on sale applying to this time period. If, however, this wasn't the case (ie not classified as a residence for the 3 months) the "period of absence" relief should apply to the 3 months.

But will it automatically apply to the three months? If Individual moves to the Holiday Cottage then I guess you're going to argue that three months isn't enough for it to become the PPR as the intention is always to return to London.

[maths]

If Individual moves to the Holiday Cottage then I guess you're going to argue that three months isn't enough for it to become the PPR as the intention is always to return to London.

Correct.

[Incredulum]

Thank you. Whereas if the individual actually moves to the Holiday Cottage and rents out London, there has been an actual new combination at which point they are in a position to make an election in favour of London, despite no longer living there?