CG65670 - Private residence relief: dependent relative: at 5 April 1988: conditions
For disposals on or after 6 April 1988, relief is available if
· the dwelling-house was acquired before 6 April 1988, and
· at some time since its acquisition and before 6 April 1988 it was occupied as the sole residence of a dependent relative, and
· the other conditions for relief are satisfied.
Where the gain on a disposal qualifies for this transitional relief the following periods will qualify:
· any period before 6 April 1988 in which the dwelling-house was the sole residence of a dependent relative;
· any period after 5 April 1988 in which the dwelling-house was the sole residence of the dependent relative who occupied it on that date;
· the final period of ownership allowed by s223(2) TCGA92, see CG64985+.
A period of occupation as the sole residence of a dependent relative which begins on or after 6 April 1988 does not qualify.
This limitation to dependent relative relief was introduced in the 1988 Finance Act and, in effect, closes the class of qualifying properties at 5 April 1988. To have simply abolished the relief at that time would have been unfair to any person who had incurred the expense of provided a dwelling-house to a dependent relative in the expectation that relief would be due. Relief will continue to be due to anyone who had provided a dwelling-house to a dependent relative before 6 April 1988 in respect of that dwelling-house as long as it is occupied by that dependent relative. So to that extent, dependent relative relief can still arise after 6 April 1988.
But no new houses can qualify for the relief in respect of the occupation by a dependent relative after 6 April 1988. Houses which already qualify because of occupation by a dependent relative before 6 April 1988 cannot qualify for a period after that date as a result of occupation by a different dependent relative.
Example
E acquired a dwelling-house in April 1978 and sold it in April 1992 realising a gain of £60,000 before private residence relief. The house was let from April 1978 to March 1981 and then occupied rent free and without any consideration as the sole residence of
· E’s widowed mother from April 1981 to March 1989 when she died, and
· E’s widowed mother-in-law from May 1989 to April 1992 when the house was sold.
The private residence relief due in accordance with s226 TCGA92 is computed as follows:
· in view of s223(7) TCGA92 (see CG64940) the period of ownership is 31 March 1982 - March 1992 = 120 months
· period of sole residence of E’s widowed mother is 31 March 1982 - March 1989 = 84 months
· final period allowed by s223(2) TCGA92 at the time of disposal = 36 months (see CG64985+)
The relief due is:
((84 + 36)/120) x £60,000 = £60,000
The gain arising is wholly relieved.