Potential changes to elections for PPR Relief
Owners of second homes are warned about potential changes to elections in regard to Principal Private Residence Relief (PPRR).
PPRR is a special Capital Gains Tax (CGT) relief that is available on the sale of a person’s home.
PPRR is particularly significant for owners of multiple homes, as PPRR is only available on the sale of a “main home”.
Currently individuals who own more than one home are within certain time limits able to “elect” which is their principal residence to make use of the relief. However the Government has proposed that, from April 2015, the decision as to which property will qualify for the CGT relief and which will be taxed, will depend on where the individual spends most of the time.
The proposed changes to PPR Relief follow a change already being introduced for this year reducing the time period for which the relief is automatically available for a property which has at any time been treated as the owner’s principal residence, from the final three years of ownership to just the final eighteen months.
In a consultation document HMRC has put forward a number of changes to the PPR identification process, as HMRC believe the current system is open to abuse.
To counter this, two main options are to be considered including giving HMRC the power to determine the “main” residence based on evidence, such as where the person’s spouse or family live, where they are registered on the electoral role or where their post is sent.
The second option is to replace the ability to make an election with fixed rules identifying a “main” residence.
These might require a simple day-count approach, and depending on the test, relevant evidence of presence may be different or additional.
These proposed changes are likely to have a significant impact on multiple home owners across the country, so it is imperative to speak to an accountant when expecting to sell a main or second home.
For more information on PPRR, please contact James Cornthwaite at the office.
Author: James Cornthwaite FCA CTA
A former pupil at St Aidan’s C of E High School, James attended Blackpool Sixth Form College and Lancaster University, graduating in 2004, gaining BSc. first class honours. He joined Moore and Smalley, Preston in 2005 and qualified as a...
Add your Comment
We have the ability to edit and/or delete posts and comments. Links should be relevant to the topics. Please note all comments are subject to review before inclusion.