Problems ahead for those with multiple homes
Readers will be aware from previous publications that Budget 2014 fundamentally changed the rules regarding:
• Principal Private Residence (PPR) Relief;
• Capital Gains Tax (CGT) exemption for non-UK resident individuals owning UK residential property.
The old rules
Prior to 6 April 2014, where a residential property was sold within 36 months of ceasing to be a main home, this would be completely exempt from CGT. This period was reduced to just 18 months with effect from 6 April 2014.
However, it is still currently possible for taxpayers with multiple homes to elect to treat one or more property as their PPR in order to receive CGT relief for the last 18 months of ownership.
Furthermore, non-UK resident individuals owning any number of UK based residential properties can currently still realise gains on these assets without paying any CGT at all.
What is changing?
In future, it is proposed that all non-UK resident individuals who realise gains on UK residential property will be within the scope of UK CGT, where previously they would have been exempt.
That is not all. In order to prevent non-UK resident individuals from using the PPR election against their UK properties, HM Revenue & Customs plan to remove the option of making an election completely for all taxpayers, when the new rules come into force.
It is proposed that the availability of PPR Relief on the sale of any residential property will need to be considered on a factual basis only, which removes the flexibility taxpayers currently have when it comes to property ownership.
When will this come into force?
The restriction of the exempt PPR period reduced from 36 months to 18 months on 6 April 2014. The rules regarding non-UK resident individuals and the proposed changes to the availability of the PPR election are due to take effect from 6 April 2015.
If you would like more information or would like to discuss your tax affairs in general, please contact our Tax Partner, Chris Barrington on the details below:
telephone: 01942 292505