Private residence relief

The CIOT has asked the government to consider delaying proposed changes to the capital gains tax rules in relation to home sales, to take account of the impact of coronavirus on the property market. Clause 23 of the Finance Bill will reduce the private residence relief (PRR) final period exemption from 18 months to nine months. The CIOT sees a significant possibility that the housing market will remain slow for some time, with properties taking much longer to sell than the average 4.5 months at the time of the 2019 consultation, leaving some sellers with an unexpected tax liability because it takes longer than nine months to sell their home.

Although respondents to HMRC’s consultation felt that a nine month final period exemption was too short, the government responded that ‘for the majority of individuals, a nine month final period exemption strikes the right balance between being long enough to provide relief whilst they go through the process of selling their home, but not so long that they are able to accrue large amounts of relief on two properties simultaneously, or on homes that are no longer used as their main residence’.