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The Government published draft clauses to be included in the Finance Bill 2019/20, together with related consultations and response documents, on 11 July.
The draft legislation includes provisions changing key aspects of principal private residence relief and lettings relief and putting a number of Extra Statutory Concessions on a statutory basis.
Principal private residence relief exempts gains realised on the disposal of an individual’s main home from capital gains tax. Under the current legislation, the last 18 months of ownership of the property is deemed to qualify for the relief, irrespective of whether the property is occupied as their main residence in that period.
The draft legislation reduces that period to the last 9 months of ownership with effect for disposals of properties on or after 6 April 2020.
Lettings relief applies where an individual disposes of a property that has been their main home but also been let out at some point. The relief can exempt a gain of up to £40,000 on disposal.
From 6 April 2020 however, the relief will be restricted to situations where the property owner is shared occupancy with the tenant.
Further provisions will put a number of extra statutory concessions on a statutory footing. Individuals who have more than one property that they occupy as a residence may be able to nominate which one should be considered their main residence for PPR purposes. Such nominations should be made within 2 years but ESC D21 permits the late nomination provided there is no previous nomination and one of the residences has a negligible capital value.
ESC D49 permits PPR where there is a delay in taking up occupation of a property and therefore benefits those individuals who cannot immediately move into what will become their main residence because it is being built or refurbished.
Finally, the draft legislation will ensure that where an individual transfers an interest in a residential property to their spouse or civil partner, that the receiving spouse will acquire the transferor spouse’s periods of use of that property. Currently, the recipient spouse only acquires the transferor’s ownership history if the property is their main residence at the time of the transfer.
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