When an individual sells his only or main residence, generally the gain is exempt from CGT due to principal private residence (PPR) relief. However two conditions need to be fulfilled in that the property must:
• not have been purchased ‘wholly or partly’ for the reason of making a gain; and
• be the individual's only or main residence at some point of ownership.
The last 36 months of ownership of a property that has been the individual’s only or main residence at some point is always treated as occupation for the purposes of the relief, regardless of whether the taxpayer is actually resident during those last 36 months.
Example:
Joan bought Rose Cottage on 1 June 2000, living there continuously until she inherited Brook House on 1 January 2003. She stayed at Brook House during the week as it was more convenient for her job, using Rose Cottage as a weekend retreat. Joan sold Rose Cottage on 1 June 2013.
Without a PPR election, Rose Cottage would be classed as Joan’s PPR from 1 June 2000 to 31 December 2002 PLUS be allowed the 36 months from 2 June 2010 to the date of sale on 1 June 2013. Rose Cottage would not qualify for PPR relief for the period 1 January 2003 to 1 June 2010.
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