Everyone who owns a property has the benefit of Principle Private Residence (PPR) relief to utilise against their main residence at the time of sale to prevent any capital gains tax arising. To meet the definition of "main residence", an individual must actually occupy the property; ways this can be evidenced include, utility bills, bank statements and being registered on the electoral roll.
However, many question whether PPR relief is compromised if they move out of the property for a period of time. In this article we discuss certain scenarios where an individual might move out of their main residence for work related reasons and when this may impact the availability of PPR relief.
Permitted absences – periods of occupation
There are permitted absences which will not cause an individual to lose their PPR relief on their main residence, provided certain time frames are met.
-
Absence for no more than three years
Regardless of why an individual is absent from their main residence, if this does not exceed three years, this will be a considered a permitted absence.
-
Moving abroad for work
If a person moves abroad for work and is officially employed abroad, then they will not lose PPR relief for their main residence back in the UK. However, this should be assessed on a case-by-case basis to ensure an individual falls within this definition as, for example, it would not protect someone who is performing some employee duties in the UK but the majority abroad.
-
Working elsewhere in the UK for no more than four years
PPR relief is not restricted where an individual is either working elsewhere in the UK or is required to live elsewhere to do their job, provided this period (or periods) does not exceed four years. Moving jobs for a period of time is a big commitment and many individuals may not feel completely secure. As such, they might not be prepared to uproot and cut all ties. Many retain their main residence during this period, with the intention to return once their period of work ends. For example, if a person owns a property in Manchester but is transferred by their employer to the London office on a four-year contract, they may wish to retain the Manchester property and rent in London. In this scenario, advice should be sought to ensure the rules are followed, and time frames adhered to, so that, if they ever consider selling the Manchester property, they do not lose PPR relief on the main residence during this period of absence and have to pay tax.
Job related accommodation
Where an employee is required to live near, or on, site as it is necessary for the proper performance of their duties (for example, Property Managers and Security officers) they will often be provided with job-related accommodation. Further, if the employee's performance will be improved by living onsite it is customary for employers to provide accommodation. In addition to this, if an employee is under special security arrangements for their safety and for the performance of their duties it is likely that the employee will be given accommodation as part of those security arrangements.
It is not unusual for people to wish to retain their own home in this scenario, either for security, in case the job is not what they expect it to be, or for use during holidays / time off and to live in after their employment has ended.
When an individual owns their own property, but is considering accepting a job which provides job-related accommodation which they intend to retain, they should take advice to ensure they will not lose PPR relief for the period they are living in job-related accommodation and, in turn, give rise to a CGT liability.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.