HMRC have published responses to the consultation, 'Capital Gains Tax: Private Residence Relief: changes to the ancillary reliefs' together with draft legislation as part of Finance Bill 2020.

The draft legislation proposes changes to the Private Residence Relief rules for disposals on or after 6 April 2020:

  • The final period CGT exemption is reduced from 18 months to 9 months.
  • The special rules allowing 36 months relief for the disabled and those in a care home will not change.
  • Lettings relief will be reformed so that it is only available where the owner remains in ‘shared occupancy’ with the tenant.
  • The benefits of job-related accommodation are extended to service personnel where they live in accommodation not technically provided by the MOD but, for example, where they rent in the private rental sector.
  • The spouse to spouse transfer rules are changed, so that the receiving spouse should always inherit the transferring spouse’s period of ownership and the use to which the property was put during that time.

The respondents to the consultation of which there were over 70 thought:

  • 9 months for the final period exemption is too short; house sales, divorce and work relocation can take longer than this to resolve and one year would be more appropriate.
    • The government maintain that 9 months is sufficient based on their research.
  • The majority of respondents opposed the reform of lettings relief. Some suggested reducing it to £20,000 of gains, others to introducing reforms for lets after April 2020.
    • The government confirmed the proposed reforms will not be changed and that “accidental” landlords should not receive special treatment.
  • Most respondents agreed that extra-statutory concessions D21 (failure to make a main residence election) and D49 (delayed occupation of residence) should be legislated in their present form.
    • The government confirmed it will legislate these ESCs in their current form.
  • Most agreed with the need for changes to spousal (including civil partners) transfer rules so that recipient spouses may inherit ownership and use periods from the transferring spouse.

Links to our guides:

PRR: Private Residence Relief

Divorce & separation: toolkit

Finance Act 2019: tax update & rolling planner 2019-20

External Links: 

Summary of Responses: Capital Gains Tax: Private Residence Relief: changes to the ancillary reliefs 

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