Private residence relief: change in use: incorrect application of TCGA92 S224(2)
G bought a house on 1 June 1996 for £70,000. It was left empty until 1 June 1999 when he began to use it as his only or main residence. He sold the house on 1 June 2013 for £500,000.
The computation which he submits is
|less||Value at 1 June 1999||80,000|
|Value at 1 June 1999||80,000|
The justification given for this form of computation is that the increase in the value of the house took place when the house was being used as a residence. So TCGA92/S224(2) should be applied to wholly relieve this part of the gain.
THIS APPROACH IS WRONG for two reasons,
- TCGA92/S224(2) does not apply to these circumstances.
- Even if it did, TCGA92/S224(2) only adjusts the relief given by TCGA92/S223. It does not alter the method of computing the gain, see CG64760.
The correct method of computing the relief under TCGA92/S223(2) is -
|Private Residence Relief||14 years|
|17 years||x £430,000||(£354,118)|