Private residence relief restrictions


Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Private residence relief restrictions

Introduction – private residence relief restrictions

We have seen in other article what an attractive relief private residence relief is for homeowners.

Further, the property must be occupied as a main residence by the taxpayer and that a taxpayer (and spouse or civil partner if relevant) can only have one main residence.

Finally, we have seen that it is the quality of occupation that matters rather than the quantity.

However, this article provides an overview of some of the other issues that, in situations that might otherwise qualify for private residence relief, could result in private residence relief restrictions.

This includes:

  • Business use;
  • Where the taxpayer is non-UK resident; and
  • Where there is a holdover claim in place

Private residence relief restriction – business use

As a result of technology facilitating flexible working, more and more people will now work, or run businesses, from their homes.

However, this can potentially provide for a bear trap (or should that be tax trap?)

You should note that where a part of a property is used exclusively for business then here is no private residence relief available for that part of the house.

Where this is the case then any gain should be apportioned on a just and reasonable basis between the relevant area and the rest of the house.

It should be noted that most people who work from home do not exclusively use an area of the house for this purpose even where they have an office. However, if there was some concern that this might be an issue, a belts and braces approach might be for a business to enter in to a licence agreement. This agreement would make it clear that the use of the space was non-exclusive use.

Private residence relief restriction: non-UK resident individuals

Historically, and prior to April 2015, non-residents were outside of the scope of UK CGT other than in limited circumstances and where an anti-avoidance rule was triggered.

As such, private residence relief was pretty academic to a non-resident taxpayer.

However, this changed in relation to UK residential property with effect from 6 April 2015. From this date, the gains on this type of property were brought within CGT – albeit only any part of a gain that arose after that date.

As such, the tax code needs to give a nod to the fact that a non-UK resident could have a main residence in the UK.

Such a person will be able to make an election for private residence relief in restricted circumstances. They will need to demonstrate that they are present in their UK home for 90 ‘midnights’. Alternatively, that they were resident for tax purposes in the UK in the relevant tax year.

Private residence relief restrictions: holdover relief claims

As you may be aware, albeit being somewhat counter-intuitive, a gift of a chargeable asset will generally trigger a chargeable gain. However, the donor will not have received any cash for the asset transferred.

In this context, in certain circumstances, a relief will be available. This is called a holdover claim and principally applies on:

  • Certain gifts of business assets; and
  • Transfers in to trust

The first is not really relevant in respect of private residence relief.

Where an asset is transferred to a trust then, generally, TCGA 1992, s260 will be available under which a holdover claim may be made.

This allows the asset to be transferred at a value that gives no gain and no loss. In other words, it is transferred at the base cost of the asset. As such, there should be no tax.

If a claim us made under TCGA 1992, s260, a future claim to private residence relief will be refused (unless the holdover relief claim is revoked).


If you have any queries regarding private residence relief restrictions, or private residence relief more generally, then please get in touch.



Private residence relief restrictions was last updated 17 September 2018

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