My client is concerned that when it comes to a future sale, the fact that he was not actually living in the property, that period of renovation will not count as relevant for principal private residence relief (PPR) and a partial gain might arise on the ultimate disposal?
This situation is covered by two sets of rules. Those applying to disposals before 6th April 2020 which were covered by Extra Statutory Concession D49 and those disposals after 5th April 2020 where the concession has been enacted as Section 223ZA Taxation of Chargeable Gains Act 1992 (TCGA 1992). Although it must be said that this was not an enactment of the provisions of the concession.
Gains arising prior to 6th April 2020 will be largely historical and the reader is directed to the concession. The detail can be accessed in HMRC manuals at CG65003.
For gains arising after 5th April 2020, the property is treated as the main residence provided certain conditions are met:
- It must be a disposal of the only or main residence and qualify for relief under S222 TCGA 1992.
- The property must have become the only or main residence within the first 24 months of the individual’s period of ownership. The date this happens is known as the moving-in time.
- At no time between the start of the period of ownership and the moving-in time was the property another person’s residence.
- Starting with the beginning of the period of ownership and the moving-in date, there is a qualifying event.
Qualifying events are either the completion of construction, renovation, redecoration or alteration of the property or the disposal of an interest in another property which was the only or main residence. In determining the date of disposal for the second qualifying event, the provisions of s28 TCGA 1992 are ignored meaning it is the completion date not the contract date that determines the date of disposal of the other property.
Should the provisions apply, the property is treated as the main residence for the additional period from the start of the ownership period and the moving-in time.
In this case, it would appear that these provisions are met, and the relief will apply from the date of inheritance.
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