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Most people are aware that a Capital Gains Tax relief exists to exempt a gain made on their Principal Private Residence (PPR), subject to certain exceptions.

This is straightforward if you have lived in the property for the full length of ownership. But what if there have been periods of absence or you own a number of different properties?

Some periods of absence can occur without losing relief, provided that you occupy the property before and after the absence. These periods are:

    •    Up to three years for any reason
    •    Any length of time when the owner or spouse is employed abroad

    •    Up to four years when the owner or spouse is working elsewhere in the UK, or where they were required to live somewhere else to do their job properly

In addition to these periods, the last three years of ownership is always deemed occupation even if there is no actual occupation (ownership before 31 March 1982 is ignored).

If a period of absence is not covered by the above categories, then it may be chargeable to Capital Gains Tax unless it was let in that period. A ‘letting relief’ is available restricted to £40,000 (£80,000 for joint ownership), the gain already exempt or the gain relating to the letting period, whichever is less.

If you purchase an additional residence then you may nominate, within two years, which is your main residence by notifying HMRC. This is a powerful tool to maximise the reliefs available provided that you reside in both properties. 

If a couple purchase a second home, nominate this property as their PPR then switch it back to their main residence, say after one month, the last three years of ownership will be exempt from Capital Gains Tax and only one month of the ownership of their main property will be subject to Capital Gains Tax. There can only be one PPR per couple.

These can be complex matters and, unless your circumstances are simple, professional advice should be taken.



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