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PPR relief if 2 houses one in UK one in France

PPR relief if 2 houses one in UK one in France

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Client owned a house in France from July 2007 to when he sold it in November 2020. 

He also bought a house in the UK in June 2012 which he sold in February 2021. 

So he had 2 houses from June 2012 but no elections were made as to which house was his PPR.

He lived in France full time from 2007 to June 2012 and was a french tax resident. So France was his PPR from July 2007 to June 2012.

He moved back to the UK to live in 2012 and became UK tax resident at that point and started doing UK tax returns. Although no election was made as to which was his PPR all the facts indicate his UK home was his PPR from June 2012 onwards using the criteria listed HMRC's CG64545 plus other facts.

He lived in the UK house full time for 2 years from June 2012 to June 2014 and after that spent approximately 4 months a year in France at his French House and 8 months a year at his UK house. The french house was not rented out. The UK house was rented out for around 90 days a year but was available to rent for 4 months a year.

I am trying to work out how much PPR relief he will get on the 2 houses.

I believe that with the french house he will get PPR relief for the 5 years he lived there full time (July 2007 to June 2012) plus last 9 months. So period of ownership 161 months PPR relief for 69 months so 42.8%. I don't think the new rules from April 2015 will change this and anyway he spent more than 90 days in France in 2021 tax year

On the UK I estimate PPR relief for 2 tax years years (2012 to 2014) plus 8 months a year for 6 tax years years (2014 to 2020) plus last 9 months of ownership. So period of ownership 104 months PPR relief for 81 months so 77.8%

Replies (23)

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RLI
By lionofludesch
03rd Apr 2021 16:56

Are you saying that, in your opinion, from 2014, neither house was his PPR for four months of the year ?

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By soundadvice
04th Apr 2021 00:15

Hi Lion thank you for your comments
Do you think it is possible to also claim PPR relief for the 4 months a year spent at the French House since 2014?
I thought initially maybe he could claim the 4 months PPR against the UK house for "periods of absence for any reason" but as he owned and used the house in France for those months I believe that precludes a claim on the UK house for those months .
I did not think he would be able to claim PPR relief against the french house for the 4 months a year he spent there since 2014 but maybe he can?
Could one argue that if the UK house wasn't available for use for those 4 months (as it was rented out) then for those 4 months the french house must have been his PPR?
Is it possible to claim PPR relief on 2 different houses for the same year if you are claiming for different periods of time within that year so 8 months PPR on the UK house and 4 months PPR on the french house.

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Replying to soundadvice:
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By The Dullard
06th Apr 2021 15:42

soundadvice wrote:

Do you think it is possible to also claim PPR relief for the 4 months a year spent at the French House since 2014?

No. It wasn't his only or main residence; it certainly wasn't his only residence and the main residence is the one he spends most of his time (2/3rds of the year) in.

soundadvice wrote:

I thought initially maybe he could claim the 4 months PPR against the UK house for "periods of absence for any reason" but as he owned and used the house in France for those months I believe that precludes a claim on the UK house for those months .

Why on earth would you believe that? Both are residences. Both are capable of being deemed occupied during periods of absence under s 223(2)(a), but only one of them is the main residence, as a matter of fact.

soundadvice wrote:

I did not think he would be able to claim PPR relief against the french house for the 4 months a year he spent there since 2014 but maybe he can?

No. He can't. Not without having made an election by June 2014

soundadvice wrote:

Could one argue that if the UK house wasn't available for use for those 4 months (as it was rented out) then for those 4 months the french house must have been his PPR?

No.[head-in-hands-emoji]

soundadvice wrote:

Is it possible to claim PPR relief on 2 different houses for the same year if you are claiming for different periods of time within that year so 8 months PPR on the UK house and 4 months PPR on the french house.

No.[bleeding-from-eyes-emoji]
The whole of the gain on the UK property is exempt. There will be a tax liability, calculated on the basis set out in your OP, but it seems quite likely that there will (or should) be some French tax to set against it.

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By The Dullard
06th Apr 2021 15:49

Why having spent half an hour typing a response, and then subsequently doing a quick edit for readability does it get blocked by the stupid spam filter; that clearly is stupid, since it doesn't filter actual spam!

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Replying to The Dullard:
RLI
By lionofludesch
06th Apr 2021 15:55

The Dullard wrote:

Why having spent half an hour typing a response, and then subsequently doing a quick edit for readability does it get blocked by the stupid spam filter; that clearly is stupid, since it doesn't filter actual spam!

Dulls was thinking what I was. Just because you're on holiday for four months doesn't mean you lose PPRR.

On 6th Apr 2021 | The Dullard Wrote:

soundadvice wrote:
Do you think it is possible to also claim PPR relief for the 4 months a year spent at the French House since 2014?

No. It wasn't his only or main residence; it certainly wasn't his only residence and the main residence is the one he spends most of his time (2/3rds of the year) in.

soundadvice wrote:
I thought initially maybe he could claim the 4 months PPR against the UK house for "periods of absence for any reason" but as he owned and used the house in France for those months I believe that precludes a claim on the UK house for those months .

Why on earth would you believe that? Both are residences. Both are capable of being deemed occupied during periods of absence under s 223(2)(a), but only one of them is the main residence, as a matter of fact.

soundadvice wrote:
I did not think he would be able to claim PPR relief against the french house for the 4 months a year he spent there since 2014 but maybe he can?

No. He can't. Not without having made an election by June 2014

soundadvice wrote:
Could one argue that if the UK house wasn't available for use for those 4 months (as it was rented out) then for those 4 months the french house must have been his PPR?

No.[head-in-hands-emoji]

soundadvice wrote:
Is it possible to claim PPR relief on 2 different houses for the same year if you are claiming for different periods of time within that year so 8 months PPR on the UK house and 4 months PPR on the french house.

No.[bleeding-from-eyes-emoji]The whole of the gain on the UK property is exempt. There will be a tax liability, calculated on the basis set out in your OP, but it seems quite likely that there will (or should) be some French tax to set against it.

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By Tax Dragon
06th Apr 2021 17:12

.oO Dulls writes the analysis, Liono gets the thanks....

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Replying to Tax Dragon:
RLI
By lionofludesch
06th Apr 2021 17:32

That's life ........

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Replying to lionofludesch:
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By Hugo Fair
06th Apr 2021 17:59

Actually it was me (I've never been called 'life' before) ... thanking you for saving all The Dullard's hard work. [No comment on the efficacy of AWeb software].

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Replying to Hugo Fair:
RLI
By lionofludesch
07th Apr 2021 09:51

Ah well - Dulls' post has now mysteriously appeared and is available for thanking.

It's the pink one.

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A Putey FACA
By Arthur Putey
07th Apr 2021 09:25

I feel the need to start an accountancy emoji thread, assuming it hasn't been done before. Might be a bit pointless though as the site does not support them :-D

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By soundadvice
07th Apr 2021 16:47

A big thank you to both Dullard for very useful feedback and Lion again for retrieving Dullards original post.

Happy with the position on the french house. It was his PPR for the 4 years he lived there full time and last 9 months. With that PPR relief the UK CGT due on the french sale is less than the french tax already paid.
Just one thing on the french tax. The french have recently replaced the social security contribution payable on sale (which could not be offset against UK CGT) with a 7.5% Solidarity Tax. So French tax payable on the sale (less allowable indexation in France) is 19% + 7.5%. I believe the Solidarity Tax paid in France can also be offset against UK CGT payable on the french property.

Re the UK property. I was surprised that the whole of the UK gain would be exempt. That sounds like good news.

For 2 reasons I thought the period of 4 months a year that the UK property was rented out would not qualify for PPR relief but happy if I have misunderstood the rules.

Firstly .. I thought that the 4 months a year that he was away from the UK property and renting it out (whilst he lived in his french property for those 4 months) would not be eligible for PPR because I read that to qualify for full relief during a "period of absence for any reason" no other eligible residence should be available for use during that period of absence. In this case the french residence was available during the period of absence so my thought was that a claim for PPR for the periods of absence on the UK house could not be made for those 4 months a year.

Secondly .. I also thought that if the house was used exclusively for business purposes (ie rented out) at any time then the relevant portion of the gain (ie 4 months a year) would not qualify for PPR relief.

However if I have misinterpreted and the whole of the UK gain is exempt that would clearly be a good result.

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Replying to soundadvice:
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By Tax Dragon
07th Apr 2021 17:21

soundadvice wrote:

Firstly .. I read that to qualify for full relief during a "period of absence for any reason" no other eligible residence should be available for use during that period of absence.

You are either overlooking the word "eligible" or forgetting that the French property is not eligible during the period of absence. But anyway, that's based on old s222(7), which read: "'period of absence' means a period during which the dwelling-house or the part of the dwelling-house was not the individual’s only or main residence and throughout which he had no residence or main residence eligible for relief under this section".

It's all be rewritten now and you should look at the new rules.

soundadvice wrote:

Secondly .. I also thought that if the house was used exclusively for business purposes (ie rented out) at any time then the relevant portion of the gain (ie 4 months a year) would not qualify for PPR relief.

I think here you are confusing fact with fiction. The whole point of the fiction (the period of absence rules deeming the property to be a residence) is that it's not fact(ually one). Indeed, new s222 defines period of absence in those very terms: "in this section 'period of absence' means a period during which the dwelling-house or the part of the dwelling-house was not occupied by the individual as a residence."

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Replying to soundadvice:
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By The Dullard
07th Apr 2021 17:29

soundadvice wrote:

Firstly .. I thought that the 4 months a year that he was away from the UK property and renting it out (whilst he lived in his french property for those 4 months) would not be eligible for PPR because I read that to qualify for full relief during a "period of absence for any reason" no other eligible residence should be available for use during that period of absence. In this case the french residence was available during the period of absence so my thought was that a claim for PPR for the periods of absence on the UK house could not be made for those 4 months a year.

That was the case before the FA 2015 changes. It is no longer the position for disposals on or after 6 April 2015.

soundadvice wrote:

Secondly .. I also thought that if the house was used exclusively for business purposes (ie rented out) at any time then the relevant portion of the gain (ie 4 months a year) would not qualify for PPR relief.

Is it used exclusively for business purposes during those four months? Really? If it were me, I'd be leaving some of my belongings there, and part of my reason for renting it would be so that there was someone there to prevent it being burgled, vandalised or used as a squat, all for the purposes of my own reoccupation.

Also, HMRC don't accept that an individual letting property is a business for s 162 purposes, unless there's some substance to it. I have no idea why they should then suddenly form the view that such a passive venture is a business for s 224 purposes. An expression involving eating cake, but not Marie Antoinette, springs to mind.

Plus what TD said.

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Replying to soundadvice:
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By More unearned luck
07th Apr 2021 21:18

Why do you believe that the solidarity tax is admissible? I don't know the answer, but since it is replacing an inadmissible tax I would start from the initial assumption that it too would be inadmissible until I discovered the actual answer. So what informs your belief, other than wishful thinking? What is the nature of this new tax? Is it hypothecated or does it go into the general coffers? For what it's worth, HMRC don't list it in their manual either way (perhaps they are slow on updating it) and I can't be bothered to look up the SI, as I doubt that it has changed. I would hesitate claiming relief for a tax that HMRC didn't expressly state was admissible.

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By Matrix
07th Apr 2021 17:03

Have you seen this? Although it is silent on whether the solidarity tax is a credit for UK capital gains tax purposes.

https://www.accountingweb.co.uk/tax/personal-tax/brace-for-brexit-20-tax...

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By soundadvice
07th Apr 2021 17:47

Thanks Matrix. The french house was fortunately sold in December 2020

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By soundadvice
07th Apr 2021 18:46

I envy the handle you guys have on the detail of these types of questions. I have been googling and researching the question of PPR relief on the UK property and deemed periods of absence since before Easter. I reckon I've spent over 6 hours on it and couldn't come up with the guidance you have knidly provided.

My reading of everything I read was that as he had another house (which he owned) available to use (in France) whilst absent from the UK house then he could not claim relief for the deemed period of absence for the 4 months a year he was away. I hadn't come across any reference to S222 being rewritten in 2015 during that time researching and I've just been googling for another hour since your really helpful advice and I still can't find the revised wording of S222. I find it so frustrating sometime and its not for lack of effort!!

To be honest I'm just in awe of how you find the information.

If I understand it correctly what you seem to be confirming is that under the current revised wording as the french house is not eligible to be his PPR (because the UK house is his PPR) then he can claim deemed residence for the 4 months a year he is away from the UK house.

How/where do I find the wording of the revised S222?

Also just renting the whole house out for 4 months a year does not constitute a business and therefore these 4 months do not need to apportioned out of the PPR claim.

It seems you are both saying loud and clear that so long as the UK property is his PPR based on the facts (which I believe it is) then a full claim for PPR relief can be made.

Many thanks again

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Replying to soundadvice:
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By Tax Dragon
07th Apr 2021 23:17

Whilst The Dullard might be right about whether it's a business*, I don't think it relevant here. I think the exclusion of relief to which you refer comes from s224(1); I also think s224(1) is not in point, because that deals with the situation when part of the house is used for business the whole of the time. What you have is the whole of the house being used for 'business' a part of the time. So I think s224(2) is the relevant provision... except that this situation is in fact already dealt with in full by the preceding sections, and s224(2) merely watches on benignly.

*Dulls has argued the opposite pretty cogently on occasion (though admittedly against the wisdom passed down to us by the courts).

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By soundadvice
08th Apr 2021 09:21

Many thanks again for the detailed feedback. To be honest I'm still not 100% sure I've got it but I greatly appreciate the time and effort you have all kindly put into it.

So my understanding of the feedback is that he does qualify for relief for periods of absence for any reason (even though he has use of another house he owns whilst he is absent).

If I have still got this wrong I would really appreciate it if you could let me know so I don't end up getting it wrong!

The question of whether renting a property out for 4 months constitutes business use is a grey area but not really relevant if the period of absence is allowed anyway.

I have found it really frustrating trying to key into the actual legislation Tax Dragon and Dullard have referred to, to try and fully understand everything; I just can't find a link straight into the legislation. Is it something that has to be subscribed to somewhere?

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Replying to soundadvice:
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By Tax Dragon
08th Apr 2021 10:06

A subscription helps (you'll get commentary as well as the legislation). It'll save you, based on what you've told us, hours of internet searching. Hours you could use to do better, chargeable, work. It'll pay for itself.

That said, if I put, say, "s222 TCGA" into a search engine, the top hit is https://www.legislation.gov.uk/ukpga/1992/12/section/222/enacted

That's old s222 (probably something in my history... searching on some other sections gives me the revised versions). You can get from old to new though - click on the "latest available (revised)" button, top left. That takes you here: https://www.legislation.gov.uk/ukpga/1992/12/section/222

If you are advising about tax, don't have commentary, don't use the law, don't use HMRC manuals, don't have some sort of case reference work, and are relying on Google (or even Google+Aweb)... sorry, but that's not 'sound advice'. IMHO.

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By The Dullard
08th Apr 2021 11:40

Legislation.gov.uk is actually becoming better than paid for legislation, in some respects, although I tend to cross-check, because there's a little slider thingy at the top now and you can select what date you want the law at.

Obviously you can do similar with paid for legislation using the legislation history and the archive, but it's much less faffing about on Legislation.gov.uk. The weakness is it reflects the date the legislation changed, rather than the date that changes were effective from.

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By soundadvice
08th Apr 2021 11:35

Thats great many thanks for your guidance Tax Dragon.

I have now subscribed to access Croner i and can see the updated version of S223 (7B) which clearly says "the requirement that there should be no other residence eligible for relief has been dropped".

Got there in the end and sorry for dragging it out. Until recently I was part of a larger set up with access to other resources and this episode has highlighted to me the need to ensure resources like Croner can still be accessed.

Thank you again

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By soundadvice
08th Apr 2021 13:30

Thank you also again to Dullard .. much appreciated!

Shall we swap pseudonyms?!!

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