3rd June 2019
The Chartered Institute of Taxation (CIOT) has called for HMRC to review the use of private residence relief, before making changes that have been proposed for April 2020.
Private residence relief allows people selling their home to do so without incurring a capital gains tax charge.
If a property has qualified for private residence relief at some point during ownership, it almost always qualifies for a ‘final period exemption' of 18 months, to allow for any delays in selling a property.
HMRC recently launched a consultation which proposed to reduce the final period exemption from 18 months to 9 months from April 2020.
It says this is intended to prevent individuals from accruing private residence relief on two properties simultaneously, and to better target the exemption at owner-occupiers.
In response, the CIOT has said HMRC should review the aims and use of the relief before making the change.
Aparna Nathan, chair of the CIOT's capital gains tax and investment income sub-committee, said:
"We are concerned that these changes indicate a trend towards repeatedly whittling away this important but admittedly costly relief.
"Regrettably, a simple relief has become overcomplicated, with scope for taxpayers to go wrong."
She added that an alternative approach might be to link the final period exemption more closely to the period of owner occupation.
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