My client bought a house in 2003, and lived in it as his main residence. In 2006 the house burnt down. He spent 6 years fighting his insurance company and eventually demolished what remained of the original house and built a new one. During toe 6 years he lived in another nearby flat which he owned. He has since sold that flat and claimed PPR for the time he lived in it. He is now selling the new house, having lived there for the past 3 years. I am looking at the cgt. There is a large gain on the disposal. I think that the whole of the gain is eligible for PPR, on the grounds that the new dwelling has been his main residence for the whole of his period of ownership, ie the last 3 years. Prior to then the dwelling being sold did not exist, so logic states that the dwelling is eligible for PPR for the whole of his period of ownership. I cannot find any guidance or case law on this point, so any ideas would be appreciated.
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Initial thoughts only
But he's owned the land on which the new house is built since he acquired the old house, hasn't he? Is the insurance receipt a part disposal (to which PPR would apply)? That then leaves you with some cost which, added to the cost of rebuilding gives you your base cost. You can then calculate the gain. Ownership period = date od house acquired to date new house sold. PPR period = PPR period for old house (until it burnt down) + PPR period for new house.
I would want to look at Henke too.
Anyway - those are my initial thoughts. I hope other people might be prompted to agree/disagree so that you get an answer!
You need to look at the whole period of ownership of the land. That is the decision in Henke. See http://www.bailii.org/uk/cases/UKSPC/2006/SPC00550.html
When the original house burned down, that was a disposal of the original house, and a disposal and reacquisition of the land (at market value), by virtue of TCGA 1992, section 24 (subsections 1 and 3).
That has the effect that the period of ownership of the land would have commenced in 2006, when the house burned down, meaning that 3/9ths of the gain is not chargeable, and the gain is calculated by reference to the value of the land (with a house that needs demolishing on it) in 2006.
You can choose not to apply section 24(1) and (3), but then the period of ownership begins in 2003, and only 3/12ths of the gain is not chargeable, and the gain is calculated by reference to original cost