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Is PPR relief available on whole of the property?

Private Residence Relief on Inherited Property?

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A client has sold a property for £173,000 in the 2018-19 tax year.

He acquired a 1/3 ownership of the property in 1985 with his Mum and Dad. The 1/3 of the property cost him £3000. He lived in the property until 1988 when he moved out and lived in a new main residence.

In 2007 his Mum died and half of her share (1/6 of the overal property) was given to my client and the other half given to his Dad. At this time the 1/6 was valued at £22,000.

in 2011 his Dad died and his 50% of the property was given to my client. The 50% at this point was valued at £65,000.

The property has then been let until being sold in 2018/19 tax year.

With regards to PPR Relief and Lettings Relief, would this only be relevant on the 1/3 share he acquired in 1985? Meaning that two capital gains calculations would be necessary. One for the 1/3 acquired in 1985 and the other detailing the gain on the inherited amounts. Or would only one calculation be completed, thus giving PPR and Lettings Relief on the inherited amounts eventhough he did not live in the property at the date he inherited the additional shares?

Thank you in advance

 

 

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By MJShone
22nd Nov 2019 12:33

Nobody has relied, so I'll do so in the hope that it draws in others, if only to correct me!

See s222(7).

Sale proceeds = £173,000. Base cost is £3,000 + £22,000 + £65,000 = £90,000.

Gain before relief is £83,000. Period of ownership is 1985 to 2018 (say 33 years). Lived in it for 3 years- add last 18 months, gives you 4.5/33 of the gain is exempt (£11,300) Let for 7 years - deduct last 18 months which is already covered = 5.5 years of lettings relief - capped at lower of 4.5 years' relief and £40,000 - so £11,300.

Total relief £22,600. Gain after relief = £60,400.

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