Relief under s 222 TCGA 1992 will be available in full to relieve any gain from being chargeable. However, this is only the case if the dwelling-house has been the individual’s main residence throughout the period of ownership. Under s 223(1) TCGA 1992 the last 18 months are deemed to be a period of occupation whether or not actually occupied.
Just before completion of the purchase of a house, there is a flood in the property and this delays occupation. The legislation provides no relief for a period of non-occupation on the acquisition of the property. So does this mean that full relief for the main residence will be denied on a later sale?
About delayed occupation
Where there is a delayed occupation of a main residence there is relief in the form of an Extra-Statutory Concession which is ESC D49. The concession applies in two circumstances. Firstly, where land is acquired to build a house that is then used as the only or main residence. Secondly, alterations or decorations can be done to an existing house or steps are taken to dispose of a previous residence prior to using the new house as the only or main residence. The HMRC manuals give further guidance on this and examples at CG65003.
In the circumstances outlined above the period of non-occupation following acquisition will be treated by concession as a period of occupation for the purposes of s 223(1)(2)(a) TCGA 1992. This is subject to the period not exceeding one year. Good reasons outside of the individual’s control may allow the period to be extended up to a maximum of two years. As noted in CG65009 such an extension may be authorised by the Business Unit Head or the Grade 6 Compliance Team Leader and no extension will be granted for a period longer than two years.
Failure to use house as a main residence
Failure to use the house as the only or main residence within the period allowed by the concession will prevent any PRR for the time before such use. Any subsequent gain on, say, a house constructed after land is acquired will be liable to CGT for the fraction of ownership prior to actual occupation even though the house was built later.
Relief given under the concession will not affect relief due on another qualifying property in relation to the same period. In other words, the overlap period can enable relief to be given for both the old property and the new property at the same time. Normally PRR applies to an only or main residence (s 222(1)(a) TCGA 1992). Where two or main residences exist it is possible to choose which one is to be treated as the main residence qualifying for PRR by virtue of s 222(5) TCGA 1992. CG65013 confirms that PRR can be available for two residences at the same time as provided by ESC D49.
Back to the original question
So back to the original question and if the delay in taking up occupation is no more than one-year PRR will be granted as if there had been the actual occupation. Exceptionally PRR will be given for a period of non-occupation of up to two years where the circumstances are beyond the individual’s control but this is not an easy test to meet.
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This tax Q&A was published in April 2018 – please be aware that the information above may have changed in subsequent months. This note is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or for taking professional advice.
(This content was originally produced by Croner Taxwise Limited and is reproduced with their permission)