This blog will provide a brief outline of the Private Residence Relief (PRR).
The PRR is a capital gains tax relief that is applied automatically when you sell your property. You will be entitled to full relief if all the following conditions are met: the property is your main home, in which you have not been absent and no part of your main residence has been used for business purposes. However, you will not get PRR (even if you meet the criteria) if you bought the property to make a gain.
Capital Gains Tax for non-residents on UK residential property:
If you are a non-resident in the UK and you sell (or dispose of) the whole or part of an interest in a UK residential property, then you must inform HMRC (His Majesty s Revenue & Customs) and pay any Capital Gains Tax due within 30 days of the date of conveyance.
If you have let some of the dwelling house as residential accommodation, you may be able to get ‘lettings relief’ if that house was your primary residence or if part of the dwelling house has at some time in your period of ownership been let as residential accommodation while another part of the dwelling house was your only or main residence.
However, you will not be entitled to lettings relief if the whole of the dwelling house was let for a time.
An example is as follows: if you let 60% of your house as residential accommodation and occupied 40% as your home and make a gain of £60,000 when disposing of the property, you will be entitled to PRR for 40% of the gain which is £24,000. The left-over gain is £36,000 because of the letting. The chargeable gain will be £12,000. You can read more examples in the Capital Gains Tax Manual.
Residence provided for a dependent relative:
Furthermore, you may be able to get relief if you dispose of a residence which you have provided for a dependent relative. You would only be eligible for this relief if you acquired the residence before 6 April 1988 and other specific conditions were met. You can read more about the additional conditions in the Capital Gains Tax Manual.
If you are a personal representative and you have disposed of the only or main residence of one or more legatees during the administration period, you may also be entitled to relief. This would only apply to you if the legatee or legatees would be entitled to a minimum of 75% of the proceeds of the disposal of the property.
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