One of the main proposals in HMRC’s consultation on ‘Private residence relief: changes to the ancillary reliefs’, which closed on 1 June, was to cut the final exemption period from 18 months to nine months from April 2020. This final exemption period usually qualifies for relief, provided the property has qualified for private residence relief (PRR) at some point during the taxpayer’s ownership of the property. HMRC’s reason for the change is to tackle a perceived exploitation of the rules where individuals with more than one home can receive a final exemption period on both properties.
The CIOT suggests HMRC should undertake a full review of the conditions for (PRR), to test which are still appropriate and whether any can be streamlined and rewritten in a simpler format. This echoes a recommendation made by the Office of Tax Simplification in 2011.
Chair of the institute’s CGT and investment income sub-committee, Aparna Nathan QC, said: ‘If HMRC have serious concerns about abuse of the PRR, they could consider conducting a broader consultation about the objectives and effectiveness of the relief’.
‘It is important for HMRC to provide the evidence base that has been used to evaluate whether nine months is sufficient time for those who are genuinely trying to sell to move house, particularly as there are likely to be large regional variations and differences depending on property values’, Nathan added.
The final period exemption has changed several times since the introduction of CGT in 1965, initially 12 months, then 24 months, increasing to 36 months before being reduced to the current 18 months in 2014.
The CIOT is concerned that the changes indicate ‘a trend towards repeatedly whittling away this important but admittedly costly relief. Regrettably, a simple relief has become overcomplicated, with scope for taxpayers to go wrong’.
‘Given the policy intent more closely to target PRR at owner occupation, an alternative approach might be to link the final period exemption more closely to the period of owner occupation’, Aparna Nathan suggested.
Other changes considered in the consultation included:
limiting lettings relief to circumstances where owners are in shared occupancy with their tenants;
extending job-related accommodation relief to service personnel who rent privately;
legislating for ESC D21 (late PPR claims) and ESC D49 (short delay in taking up residence); and
reforming spouse/civil partner transfers to take account of all past ownership periods and use.
One of the main proposals in HMRC’s consultation on ‘Private residence relief: changes to the ancillary reliefs’, which closed on 1 June, was to cut the final exemption period from 18 months to nine months from April 2020. This final exemption period usually qualifies for relief, provided the property has qualified for private residence relief (PRR) at some point during the taxpayer’s ownership of the property. HMRC’s reason for the change is to tackle a perceived exploitation of the rules where individuals with more than one home can receive a final exemption period on both properties.
The CIOT suggests HMRC should undertake a full review of the conditions for (PRR), to test which are still appropriate and whether any can be streamlined and rewritten in a simpler format. This echoes a recommendation made by the Office of Tax Simplification in 2011.
Chair of the institute’s CGT and investment income sub-committee, Aparna Nathan QC, said: ‘If HMRC have serious concerns about abuse of the PRR, they could consider conducting a broader consultation about the objectives and effectiveness of the relief’.
‘It is important for HMRC to provide the evidence base that has been used to evaluate whether nine months is sufficient time for those who are genuinely trying to sell to move house, particularly as there are likely to be large regional variations and differences depending on property values’, Nathan added.
The final period exemption has changed several times since the introduction of CGT in 1965, initially 12 months, then 24 months, increasing to 36 months before being reduced to the current 18 months in 2014.
The CIOT is concerned that the changes indicate ‘a trend towards repeatedly whittling away this important but admittedly costly relief. Regrettably, a simple relief has become overcomplicated, with scope for taxpayers to go wrong’.
‘Given the policy intent more closely to target PRR at owner occupation, an alternative approach might be to link the final period exemption more closely to the period of owner occupation’, Aparna Nathan suggested.
Other changes considered in the consultation included:
limiting lettings relief to circumstances where owners are in shared occupancy with their tenants;
extending job-related accommodation relief to service personnel who rent privately;
legislating for ESC D21 (late PPR claims) and ESC D49 (short delay in taking up residence); and
reforming spouse/civil partner transfers to take account of all past ownership periods and use.
