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HMRC internal manual

Capital Gains Manual

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Private residence relief: settled property: disposals on or after 10 December 2003: transitional provisions: example

TCGA92/S226A

Anthony, in setting up a trust for the benefit of his orphaned niece, gifted a cottage to the trustees on 1 July 1992 and claimed gift hold-over relief under TCGA92/S260. His niece lived in the cottage under the terms of the trust as her only or main residence. When the niece married in August 2004 and moved to her husband’s house, the trustees decided to sell the cottage and entered into an unconditional contract to sell it on 30 November 2004. The chargeable gain arising on the disposal before any reliefs was £65,000.

Under the transitional provisions in FA2004/SCH22/PARA 8 the trustees are not entitled to private residence relief under TCGA92/S225 in respect of periods on or after 10 December 2003. The trustees’ total period of ownership was 149 months (1 July 1992 to 30 November 2004), of which 137.29 months were in the period before 10 December 2003.

The trustees will need to claim private residence relief, which will be calculated as follows:

Chargeable gain before private residence relief   £65,000
     
Fraction eligible for private residence relief 137.29 ÷ 149 x £65,000 = £59,892
Chargeable gain   £5,108