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HMRC internal manual

Capital Gains Manual

Private residence relief: ownership period: relief restricted by rules in FA 2004: final 36 months: example

On 1 November 1989, Edward acquired a London flat from the trustees of his family trust. The trustees’ gain on that disposal was held over by a claim made jointly by the trustees and Edward under what is now TCGA92/S260 (see CG67030+). Edward occupied the flat as his only residence until 30 September 1995, when he moved to a house in the country and gave notice that this house should be treated as his main residence.

Edward sold the London flat on 30 April 2006. The chargeable gain before any reliefs was £586,000.

Edward’s total period of ownership of the flat was 198 months (1 November 1989 to 30 April 2006). His period of actual occupation as only or main residence was 71 months (1 November 1989 to 30 September 1995). That part of the final 36 months, see CG64985 falling before 10 December 2003 amounted to 7.29 months (30 April 2003 to 9 December 2003).

Because Edward’s acquisition cost of the flat is affected by the claim for relief under section 260, the only part of the final 36 months of ownership in respect of which private residence relief is due is that falling before 10 December 2003 (FA2004/SCH22/PARA8(4)). Edward will be eligible for some private residence relief, in respect of the period that he occupied the flat as his only or main residence and the portion of the final 36 months falling before 10 December 2003, but he will have a chargeable gain which will be calculated as follows:

Chargeable gain before private residence    
relief   £586,000
Fraction eligible for private residence relief (71+7.29)÷198 x £586,000 = £231,707
Chargeable gain   £354,293