Flashcards in Chapter 21 Principal Private Resident Relief Deck (2)
PPR relief and its calculation
This is the relief an individual receives when he makes a capital gain on the sale of his main residence. PPR relief exempts all or part of a gain which arises on a property which an individual has used as his home. We start by calculating the capital gain on the sale of the property in the normal way, then we deduct PPR relief.
To calculate the PPR relief we use the formula: gain x period of occupation of property / period of ownership
Gains on a disposal of a dwelling house qualify for PPR (relevant buildings also include garages, outhouses and separate buildings). Also includes gardens and grounds, provided the entire area does not exceed half a hectare, also this can be extended if HMRC are satisfied the area is required for reasonable enjoyment of the property.
Calculation of the relief – the period of ownership begins when the unconditional contracts are exchanged. Period of occupation can also mean periods of deemed occupation (when taxpayer is physically absent from the property but treated as living there). The last 18 months of ownership are always treated as a period of deemed occupation.