PPR - available on second interest?

PPR - available on second interest?

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Fact pattern is relatively straightforward and can be rehearsed as follows:

April 2003 - Z acquired 2/3 interest in property as a joint tenant
Z - occupied as PPR until November 2004
March 2005 let as residential accommodation
June 2005 Z - acquired remaining 1/3 interest from the other joint tenant
Z- never reoccupied the property as PPR after November 2004.

Neither of the joint tenants were married nor in a civil partnership

Assume significant gain arises on the sale of the property in 2007-08, but within 36 months of November 2004

Does PPR exemption apply to entire gain or only that part of the gain that can be related to the interest when Z had occupied the property (PPR period + part of last 36 months); ie is the position considered as the acquisition of two separate assets for cgt purposes.

Mike Bell

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By MBK
04th Jul 2007 13:18

My view is that the whole gain is exempt.....
On the basis of going back to the base legislation and seeing what it says:

1: S222(1) TCGA 92 says that exemption applies "to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in, a dwelling house ...... which is, or has at any time in his period of ownership been, his only or main residence."

So that applies to the gain arising from a disposal of a dwelling house - which clearly captures both parts of the gain in your query. I cannot see that there is any distinction.

So you need to look at the amount of the relief, which is stated at S223(1) to be "No part of a gain to which S222 applies shall be a chargeable gain if the dwelling house .......... has been the individual's only or main residence throughout the period of ownership, or throughout the period of ownership except for all or any part of the last 36 months of that period"

I read that to mean that the dwelling house has to have been owned throughout - but the first part above makes it clear that it is the gain arising that is exempted - not the proportion of ownership. In any event, the additional 1/3rd purchased later merges as a matter of law with the original 2/3rds so there cannot be said to be a separate period of ownership of the 1/3rd. That is also consistent with the taper relief provisions on merged assets which are expressly set out at TCGA 93 Sch A1, para 14.

Have you trawled the Revenue manuals to see if the situation is covered?

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By michael.x.bell
04th Jul 2007 16:46

Thank you
I have trawled the HMRC manuals but with no luck.

Thank you for the succinct summary. It is one of those occurences as usually the acquiring of the remaining third would have stayed in residence - then PPR etc is easy to determine. This variant I hadn't come across before and as you probably suspected it was uncertainty over the application of merged interersts and the absence of a sounding board. Again thanks. MJB

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