ARTICLE · 16 NOVEMBER 2018

Occupation Is A Requirement For Principal Residence Relief

Hewitsons LLP

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Where Principal Residence Relief (PRR) applies, a taxpayer who sells their main residence does not have to pay capital gains tax (CGT) on the sale.

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Where Principal Residence Relief (PRR) applies, a taxpayer who sells their main residence does not have to pay capital gains tax (CGT) on the sale.

A recent Upper Tribunal decision held that a homeowner could not claim PRR for the period where he was not living in the property, despite there being an exemption which can cover a period of non-occupancy while a house is being prepared for occupation.

In 2006, Mr Higgins paid the deposit on a flat at St Pancras Station which was being built by a developer. The flat was not finished until January 2010 when Mr Higgins moved in. Exactly two years after, he sold the flat. Mr Higgins claimed CGT relief for the whole period of purchase (from 2006). HMRC disagreed and charged Mr Higgins with CGT liability for the pro rata period before he moved into the property in January 2010.

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