Share this content
0
821

PRR and period of absence abroad

Is an election under S222(5) TCGA1992 actually valid?

Didn't find your answer?

Search AccountingWEB

A person leaves the UK to go and work abroad in full time employment. He lets out his UK home whilst abroad. He occupies a property abroad under a tenancy agreeement. Upon his return to the UK a few years later he chucks his tenant out and moves back in.

He is hoping that the period abroad will be a qualifying period for PRR because, both before and after, it was his residence. However, as he was living in rented property whilst abroad (under a formmal tenancy agreement), this (rented) property would strictly also qualify for relief as his dwelling, and so this precludes his (UK owned) property from benefitting from deemd-PRR during his period abroad. It is suggested (in the HMRC manuals) that, to overcome this, an election under S222(5) be made in favour of his UK property when he first goes to work abroad, such that the overseas rented property no longer qualifies for relief and so does not scupper his plans for CGT relief on the UK property.

My question is this: in order for a S222(5) election to be valid, surely it is necessary for both properties to actually 'be used' as a home at the same time (i.e. one during the week, the other at weekends). In which case, how can it apply in a situation where a person has, as a matter of fact, left his UK property to work abroad (without returning during that period), and even let his UK property out (so it would not be available to him even if he did return to see family, etc.)?

Thanks.

 

Replies (7)

Please login or register to join the discussion.

avatar
By Matrix
21st May 2019 22:12

Surely that election only applies if he owned more than one residence?

Thanks (0)
Replying to Matrix:
avatar
By mail.taxperfect.co.uk
22nd May 2019 10:27

Matrix wrote:

Surely that election only applies if he owned more than one residence?

You'd have thought so, however...

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65047

This makes reference to a) "tenancy" (para 2) and also b) "from which the individual is absent" (para 2). So I assume it means that a) tenancy is "owned" for the purposes of the election, and also that b) an individual doesn't have to have 'as his home'.

Thanks (0)
Replying to Matrix:
avatar
By Vile Nortin Naipaan
22nd May 2019 10:45

No. The election applies if the individual has more than one residence. You don't need to own the property to have a residence.

Thanks (0)
avatar
By Vile Nortin Naipaan
22nd May 2019 10:52

You're coming at this from the wrong end.

It is the case that during a period of absence, the residence is not, as a matter of fact, in use as a residence. However, the effect of s 223(3) is to treat the property as if it is occupied as a residence (WHY NOT FUCHING READ IT!), thus making an election under s 222(5) possible to have it treated as the main residence.

Thanks (0)
Replying to Vile Nortin Naipaan:
avatar
By Tax Dragon
22nd May 2019 11:06

There is a point to the question though, isn't there? For s223(3) to apply, there has to be actual use as a residence subsequently. At the point the election is made, you don't know that that will happen.

But, OP, you get the best of both worlds. If you don't reoccupy, the election was invalid (and your other residence was your PPR after all - so you'd get relief there if you needed it); if you do, the election was valid and it's (also) happy days.

Thanks (0)
Replying to Tax Dragon:
avatar
By Vile Nortin Naipaan
22nd May 2019 11:19

If you intend to reoccupy the house you own, why would you not make the election, given that you can't make a gain on a property you don't own?

There's also the potential for ESC D21 to apply.

Thanks (0)
avatar
By mail.taxperfect.co.uk
22nd May 2019 12:59

OK, I see, thanks for the responses.

So, S223(3) deems the property as being occupied as a residence, thus there are deemed to be two properties occupied simultaneously (they don't need to be owned, merely occupied as a residence), thus an election under S222(5) is possible. And so actual occupation is not necessary. ESCD21 allows a late election in the case, for example, of someone who doesn't know if they'll be moving back in after their return to the UK (and thus doesn't know if S223(3) will apply).

Thanks again.

Thanks (0)
Share this content