The latest finance bill includes important changes to private residence relief that took effect from 6^th April 2020.

The first change is to limit to just 9 months for the period prior to disposal that counts as a period of deemed occupation and thus exempt from CGT even though the owners are not living in the property during that period. The second is to limit “letting relief” to periods where the taxpayer is in shared occupation with the tenant.

Final period exemption now reduced to 9 months

Previously, the final period exemption was the last 36 months which was felt to be too generous. The period was then reduced to the last 18 months and has now been further reduced to the last 9 months. The final period exemption will remain at 36 months for those with a disability, and those in or moving into care.

CGT Lettings Relief Changes

Lettings relief provided a further exemption for capital gains of up to £40,000 per property owner.

The additional relief was introduced in 1980 to encourage people to let out spare rooms within their property on a casual basis without losing the benefit of PRR. For example, where there are a number of lodgers sharing the property with the owner. It no longer applies where property owners rent out their former main residence.

Those who are renting their property temporarily whilst working elsewhere are unlikely to be affected by this change as there are alternative reliefs available under those circumstances.

New System for Reporting CGT on Property Disposal

A new CGT reporting and payment on account system was introduced for residential property disposals by UK resident taxpayers from the 6^th April 2020.

This new system as originally announced requires the disposal to be reported and any CGT due to be paid on account within 30 days of completion. HMRC have now announced that for disposals between 6^th April and 30^th June will not be subject to a penalty, provided that the return is made by 31^st July 2020 although HMRC will still charge interest.

We can assist you with this new reporting requirement, but you will need to be registered with the Government Gateway and authorise us to act on your behalf.