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Private residence relief and final 9 months

Is the final 9 months available?

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Client owned a residential property that was his PPR from purchase until December 2014. It was converted for use as a children's home, and so was an institutional building per TCGA Sch 1B (formerly Schedule BA1) after he moved out (and the works commenced).

Property was finally sold (still as a children's home) in Dec 2020.

Does he still get the final 9 months PRR?

Replies (32)

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By David Ex
15th Nov 2021 14:00

Odd scenario but looks like the relief is still available - unless I’ve missed something obvious.

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Replying to David Ex:
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By Tax Dragon
15th Nov 2021 14:34

I think you've missed the point of the question. (To be fair, it's not obvious that the OP hasn't missed the point of the question. Cue a 3-page thread...)

That point is: does Sch 1B (which OP implies excludes the gain from being a dwelling for the purposes of that Schedule (see para5(1)) mean that the building is not a dwelling-house for the purposes of s222?

I don't think it does mean that - else what does "for the purposes of this Schedule" mean? But I'm not sure that matters.

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Replying to Tax Dragon:
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By Tax Dragon
15th Nov 2021 15:16

Tax Dragon wrote:

Cue a 3-page thread...

I invite members to take a beat to think on why this thread is unlikely even to make 10 posts. Sure, part of that is the OP (I doubt Steve is about to turn vitriolic here); is that the only reason? Really?

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Replying to Tax Dragon:
By Duggimon
17th Nov 2021 10:02

Tax Dragon wrote:

Tax Dragon wrote:

Cue a 3-page thread...

I invite members to take a beat to think on why this thread is unlikely even to make 10 posts. Sure, part of that is the OP (I doubt Steve is about to turn vitriolic here); is that the only reason? Really?

27 posts and counting, your façade has disintegrated entirely!

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Replying to Tax Dragon:
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By David Ex
15th Nov 2021 15:16

Tax Dragon wrote:

I think you've missed the point of the question. (To be fair, it's not obvious that the OP hasn't missed the point of the question. Cue a 3-page thread...)

That point is: does Sch 1B (which OP implies excludes the gain from being a dwelling for the purposes of that Schedule (see para5(1)) mean that the building is not a dwelling-house for the purposes of s222?

I don't think it does mean that - else what does "for the purposes of this Schedule" mean? But I'm not sure that matters.

Thank goodness for my caveat! I think I read about that provision on here some time ago but had forgotten all about it. Interesting one!

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Replying to Tax Dragon:
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By Tax Dragon
15th Nov 2021 15:22

Tax Dragon wrote:

...excludes the gain from being a dwelling...

Clearly gibberish. Façade in pieces.

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By Paul Crowley
15th Nov 2021 14:28

I claim it without really thinking about it
If let the property qualifies so it would be odd if this did not

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By SteveHa
15th Nov 2021 14:36

Thank you. I couldn't find anything that would disallow. It just struck me as odd that the final 9 months of PRR would be available for a property which could no longer be occupied as a private residence.

I think I'll go with it.

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Replying to SteveHa:
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By Tax Dragon
15th Nov 2021 14:41

FWIW, I agree that, if you get any PRR, then the final 9 months would be included.

Real question is whether PRR is in point at all.

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Replying to Tax Dragon:
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By More unearned luck
15th Nov 2021 15:25

There are two periods to consider: from moving out to the opening of the home and from the opening of the home until completion of the sale.

Taking the second period first, s 224(1) one seem to deny relief as the property has been exclusivly used for a business etc. Section 224(2) would also seem to deny relief because of the change in use.

The same probably applies for the first period too, but I'm less certain.

Is a CGT return due? The house is still a dwelling, but tax is due solely because of business use.

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Replying to More unearned luck:
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By Tax Dragon
15th Nov 2021 15:38

More unearned luck wrote:

The house is still a dwelling...

We need to distinguish "dwelling" (per Sch 1B) and "dwelling-house" (per s222).

An institutional building is not a dwelling for the purposes of Sch 1B (see para 5(1)). I think it follows that the 60-day return isn't needed, but I haven't checked.

Anyway that's irrelevant for PRR and s222 (it's really not that interesting, @David Ex).

To get PRR, the thing sold must be a dwelling-house. OP's description of it as

SteveHa wrote:

a property which could no longer be occupied as a private residence

doesn't make it sound very dwelling-housey. But I don't know. Sometimes OPs describe things in odd ways.

I feel like I'm repeating myself - so I'm out for now. Way to get to 10 posts I suppose (50% of it me... so I'm out for now). And there was a LOT of repetition in that 3-pager. First half, anyway. Lost interest after that.

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Replying to Tax Dragon:
By SteveHa
15th Nov 2021 16:07

Tax Dragon wrote:
SteveHa wrote:

a property which could no longer be occupied as a private residence

doesn't make it sound very dwelling-housey. But I don't know. Sometimes OPs describe things in odd ways.

I chose my words carefully. I'm pretty sure that, in 2020, or indeed 2014, there would have been regulations for child safety that would prevent a children's home being occupied as the property owners private residence, particularly if he did not operate the home (which he didn't).

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Replying to Tax Dragon:
By SteveHa
15th Nov 2021 15:37

I don't see why not. It was a bona fide residence prior to conversion and change of use, occupied by the taxpayer during that period, and a part of the gain accrued in that period.

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Replying to SteveHa:
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By Tax Dragon
16th Nov 2021 10:12

SteveHa wrote:

I chose my words carefully. I'm pretty sure that, in 2020, or indeed 2014, there would have been regulations for child safety that would prevent a children's home being occupied as the property owners private residence, particularly if he did not operate the home (which he didn't).

This https://democracy.leeds.gov.uk/documents/s88107/App%201%20-%20Childrensh... was the top hit. There may be more relevant ones, but this wasn't a bad start.

Bad news he wasn't the operator. No BADR. But good news (per Paul) that this means it was let, as apparently it qualifies as a result. (No idea where that rule is, but it sounds helpful.)

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By tractorboy
15th Nov 2021 15:53

Did he buy it with the intention of living in it as his main home or was there always an intention to convert it to children's home after a period?

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Replying to tractorboy:
By SteveHa
15th Nov 2021 16:02

I know where you are coming from, but the original intention was to occupy as home.

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ALISK
By atleastisoundknowledgable...
15th Nov 2021 18:17

FWIW I’d claim it.

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
15th Nov 2021 20:52

It'd be worth more if you explained the basis on which you would make the 'claim'.

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By richard thomas
16th Nov 2021 14:41

If SteveHa’s question had just been whether PRR was available for the last 9 months in the scenario set out, then the answer is yes.

The crucial questions are whether the property was, at the date of disposal, a dwelling-house and whether at any time it had been the owner’s PPR.

As Tax Dragon says, dwelling-house in s 222 TCGA is not defined, and the definition of “dwelling” in Schedule 1B does not apply to other than Chapter 1 Part 1 TCGA.

If it was a children’s home at the time of disposal then it was a dwelling-house – since what the children were doing there was (I assume) to dwell.

The amount of relief available where s 222 applies but the dwelling was not the owner’s main residence throughout ownership (save for the last 9 months) is the fraction of the gain whose denominator is the length of ownership and whose numerator is the length of the period(s) where it was the main residence “but inclusive of the last 9 months of the period in any event” (s 223(2)).

Whether there is a return obligation under Schedule 2 FA 2019 is, as is also pointed out, a different matter. In my view the disposal is reportable because there is a chargeable gain (the fraction of the gain which does not attract PRR). Such a gain has to be attributable to “residential property” (paragraph 1 Schedule 1B TCGA)

Land is “residential property” if “at any time” in the period of ownership the land included a dwelling (Paragraph 3 Schedule 1B). The land was a dwelling up to 2014 so is a dwelling for the requisite purpose, even though it then ceased to be by virtue of paragraph 5 Schedule 1B.

I do not think it is relevant that the “residential” period is exempt under PRR – the relief is given as fractional of the overall gain, not to particular bits of the gain.

So I agree that the answer to the question as actually put by Steve is that treatment under Schedule 1B is irrelevant to PRR and the last 9 months rule.

I cannot see how lettings relief can apply if the date of disposal was after 5 4 2020 and the whole of the dwelling was let.

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Replying to richard thomas:
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By Tax Dragon
16th Nov 2021 15:34

I'm sure ALISK thanks you for giving the reply he would himself have made in due course.

I may be wrong, but I don't think anyone is disputing the tax legislation (and I am happy to stand corrected re the "at any time" aspects of RPGs).

The only question to my mind is the factual one: whether the children's home is/was a dwelling-house at the point of sale. Based solely on the link I provided above [which I acknowledge may not be relevant... but I don't know that it's not], the answer appears to be "it depends". If so, I don't see that it is appropriate for you, me, ALISK or ANOther to opine on the matter based on what we have been told.

Unless, that is, ANOther goes by the pseudonym of SteveHa, or is someone else in possession of the case facts.

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Replying to Tax Dragon:
By SteveHa
16th Nov 2021 15:47

Tax Dragon wrote:

Unless, that is, ANOther goes by the pseudonym of SteveHa, or is someone else in possession of the case facts.

I can assure you that I am the only SteveHa here, and that I have no other user names. (I did go by a different name some 18 months ago, though that was linked to my then employer, and so Sift kindly changed it for me.)

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Replying to SteveHa:
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By Paul Crowley
16th Nov 2021 15:53

And you did publicly announce it as I remember
Part of becoming an Expat

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Replying to SteveHa:
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By Tax Dragon
16th Nov 2021 16:57

SteveHa wrote:

I can assure you that I am the only SteveHa here

Ah, but are you the only ANOther out there?

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Replying to richard thomas:
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By Paul Crowley
16th Nov 2021 15:50

Always appreciate your contributions
We all think we can read, but interpretation is down to the man with the wig

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By Tax Dragon
17th Nov 2021 07:01

You may remember this article: https://www.taxadvisermagazine.com/article/place-where-we-dwell

One point it doesn't mention is planning consents/permitted use.

My logic with the previous link - the logic continuing in my response to Richard - was that, if the same term is used outside of tax law, and is not defined there either, then the meaning should be taken from the dictionary ie be the same as for tax law. The one might thus inform the other, and if change of use had been applied for, that might be enough to mean the building was no longer a dwelling-house. Or, conversely, if no such change of use had been agreed, that might be conclusive that the property was still a dwelling-house.

I'd hoped it was obvious that I thought all this, despite not having said any of it. Madness. I don't know why I think you are all psychic. I've long known very few in here - or to be fair out there - get my sense of humour, let alone find it funny; why would you know what was in my mind unless I laid it out?

Apologies for that; and apologies for the apparent tone of my comments where my humour falls flat (as it usually does). Response to Richard a case in point.

Back to the subject, whether a property registered as a children's home is a dwelling-house, and Richard's suggestion that the children dwell there so it must be a dwelling-house... does each child dwell (like in a block of flats) or do the children as a combined unit dwell (like in a family home)? And, if the latter, then do there need to be adults also 'dwelling' there (like in a family home) for that argument to pass muster?

I respectfully suggest that Richard's answer was uncharacteristically glib.

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Replying to Tax Dragon:
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By The Dullard
17th Nov 2021 09:36

The point about consents/permitted use in the link you used previously isn't relevant in my opinion as that is for LA purposes to determine whether business rates or council tax are in point.

In my view the author of the article in this latest link neatly defines a dwelling house in the title of the article.

Try working backwards. What do you do with a dwelling house? And does it need to be a house?

I put it to you that the reasons for the exclusions for SDLT purposes referred to in the article, and in Sch 1B, is that the excluded items might reasonably be regarded as dwelling houses, having all the necessary facilities for doing the thing that is ordinarily done with dwelling houses.

I don't think Richard has been glib. I think he's taken a point as obvious, which you have taken as worthy of detailed analysis, and perhaps dwelt on it too long.

Dwelling house; people live in them.

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Replying to The Dullard:
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By Tax Dragon
17th Nov 2021 09:43

The Dullard wrote:

perhaps dwelt on it too long.

Ba dum tsh. (Rather dwell on this than nappies.)

But I take your point. And I'm out after this. (I just happen to know that SteveHa likes to be thorough and have his arguments on file, rather than just people saying "I'd claim it"... FWIW [nothing], so would I, most likely.)

(And by the way the 'glib' comment was meant as a compliment... nearly every regular poster in here frequently descends to glibness. Richard and Basil are notable exceptions, for which I admire both.)

Type "dwelling-house" into google and it spits back "a house used as a residence rather than for business". That's glib too - the children definitely reside in this place of business.

The Dullard wrote:

Dwelling house; people live in them.

Sure, but not every place people live is a dwelling-house. (Otherwise that article was a waste of the author's time.)

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Replying to The Dullard:
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By richard thomas
17th Nov 2021 09:49

You're right, I wasn't being glib. I was relying on the authoritative case from the House of Lords of Uratemp Ventures Ltd v Collins, cited 12 times so far by the FTT, including by me in the SDLT case of P N Bewley Ltd. In Uratemp the occupant of a hotel room was held to have a dwelling there. Not every dwelling will be a, or in a, dwelling house, and not every care home will necessarily be in a house, but in the OP case, the care home clearly was in a house.

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Replying to richard thomas:
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By Tax Dragon
17th Nov 2021 09:58

But do children (presumably deemed not capable of independent living) 'dwell'... more specifically, does 'dwelling' mean 'independent living'? Uratemp doesn't deal with that. (This interprets what was in my mind with the child v children-as-a-unit comment. Learning to communicate more clearly is on my to-do list.)

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Replying to Tax Dragon:
By Duggimon
17th Nov 2021 10:21

There is no reason I can think of to suppose dwelling has to mean 'independent' living. To live in a place is to dwell, children live in children's homes, even where the adults in charge do not. I think you would need some specific point of law to assert otherwise and I'm not aware of one.

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Replying to Duggimon:
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By Tax Dragon
17th Nov 2021 10:51

Yes. Final final word from me... I had thought (before looking at anything) that the state of being a dwelling-house was a property of the property, if you see what I mean. But most of what I read seemed to be about how people used it. Which confused me. (Even Dulls's neat definition - Dwelling house; people live in them - talks about the people not the property.) But I've just noticed the final line from CA11520 quoted in that Tax Adviser article: "Such a flat or house would be a dwelling-house if occupied by a family, a group of friends or key workers, so the fact that it may be occupied by students is, in a sense, incidental." By extension, if what we have here is the old house with a different current use, it doesn't matter that children dwell in it. It would be a dwelling-house if occupied by a family, a group of friends or key workers. That seems to be good enough for HMRC. It's good enough for me.

(I may be slow but I get there in the end.)

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Replying to Tax Dragon:
By SteveHa
17th Nov 2021 09:47

For the record, change of use was authorised and I've had sight of LA documentation confirming this.

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