Finance Act 2004

Section 117

SCHEDULE 22Chargeable gains: private residence relief

Relief on disposal of private residence

1(1)Section 222 of the Taxation of Chargeable Gains Act 1992 (c. 12) is amended as follows.

(2)In subsection (5)(a) (notice to inspector to determine which of two or more residences is individual’s main residence) for “the inspector” (on both occasions) substitute “an officer of the Board”.

Amount of relief

2(1)Section 223 of the Taxation of Chargeable Gains Act 1992 is amended as follows.

(2)In subsection (4) (dwelling-house let as residential accommodation) in paragraph (a), omit the unnecessary words “or those provisions as applied by section 225”.

(3)After subsection (7) insert—

“(8)This section is subject to—

(a)section 224 (amount of relief: further provisions), and

(b)section 226A (private residence relief: cases where relief obtained under section 260).”.

Amount of relief: further provisions

3(1)Section 224 of the Taxation of Chargeable Gains Act 1992 (c. 12) is amended as follows.

(2)In subsection (1) (gain accruing from disposal of dwelling-house part of which is used exclusively for purposes of trade etc: relief to apply only to portion of gain) for “accrues from” substitute “accrues on”.

Private residence occupied under terms of settlement

4(1)Section 225 of the Taxation of Chargeable Gains Act 1992 is amended as follows.

(2)In the opening words—

(a)for “a trustee” substitute “the trustees of a settlement”, and

(b)for “the trustee” substitute “the trustees”.

(3)In paragraph (a), for “the trustee” substitute “the trustees”.

(4)In paragraph (b)—

(a)for “the inspector” substitute “an officer of the Board”, and

(b)for “the trustee” substitute “the trustees”.

(5)At the end of that paragraph insert “;

but section 223 (as so applied) shall apply only on the making of a claim by the trustees.”.

Private residence held by personal representatives

5After section 225 of the Taxation of Chargeable Gains Act 1992 insert—

“225APrivate residence held by personal representatives

(1)Sections 222 to 224 shall also apply in relation to a gain accruing to the personal representatives of a deceased person on a disposal of an asset within section 222 (1) if the following conditions are satisfied.

(2)The first condition is that, immediately before and immediately after the death of the deceased person, the dwelling-house or part of the dwelling-house mentioned in section 222 (1) was the only or main residence of one or more individuals.

(3)The second condition is that—

(a)that individual or one of those individuals has a relevant entitlement, or two or more of those individuals have relevant entitlements, and

(b)the relevant entitlement accounts for, or the relevant entitlements together account for, 75% or more of the net proceeds of disposal;

and for this purpose “relevant entitlement” means an entitlement as legatee of the deceased person to, or to an interest in possession in, the whole or any part of the net proceeds of disposal.

(4)In subsection (3) above “net proceeds of disposal” means—

(a)the proceeds of the disposal of the asset realised by the personal representatives, less

(b)any incidental costs allowable as a deduction in accordance with section 38(1)(c) in computing the gain accruing to the personal representatives on that disposal,

but on the assumption that none of the proceeds is required to meet the liabilities of the deceased person’s estate (including any liability to inheritance tax).

(5)In sections 222 to 224 as applied by this section—

(a)references to the individual shall be taken as references to the personal representatives except in relation to the occupation of the dwelling-house or part of the dwelling-house, and

(b)the notice which may be given to an officer of the Board under section 222(5)(a) shall be a joint notice by the personal representatives and the individual or individuals entitled to occupy the dwelling-house or part of the dwelling-house.

(6)But section 223 (as so applied) shall apply only on the making of a claim by the personal representatives.”.

Private residence relief: cases where relief obtained under section 260

6After section 226 of the Taxation of Chargeable Gains Act 1992 insert—

“226APrivate residence relief: cases where relief obtained under section 260

(1)This section applies where—

(a)section 223 applies, or would apart from this section apply, in relation to a gain or part of a gain accruing to an individual or the trustees of a settlement (“the transferor”) on a disposal (the “later disposal”),

(b)in computing the chargeable gain which would, apart from section 223, accrue to the transferor on the later disposal, the allowable expenditure would fall to be reduced, and

(c)that reduction would to any extent fall to be made in consequence, directly or indirectly, of a claim or claims under section 260 in respect of one or more earlier disposals (whether or not made to the transferor).

(2)If a claim for relief under section 260 in respect of—

(a)the earlier disposal, or

(b)if there were two or more such disposals, any of them,

is made on or before the making of the later disposal, section 223 shall not apply in relation to the gain or part of a gain accruing on the later disposal.

(3)If a claim for relief under section 260 in respect of—

(a)the earlier disposal, or

(b)if there were two or more such disposals, any of them,

is made after the making of the later disposal and subsection (2) above does not apply, it is to be assumed for the purposes of capital gains tax that section 223 never applied in relation to the gain or part of a gain accruing on the later disposal.

(4)All such adjustments shall be made, whether by discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to subsection (3) above (notwithstanding any limitation on the time within which any adjustment may be made).

(5)Where the later disposal is made by the trustees of a settlement, the references in subsections (2) and (3) above to the making of the later disposal shall be read as references to the making of a claim for relief under section 223 in respect of the gain or part of a gain accruing on that disposal.

(6)If a claim for relief under section 260 in respect of an earlier disposal is revoked, this section shall apply as if the claim had never been made.

(7)This section is subject to section 226B (exception for maintenance funds for historic buildings).

226BException to section 226A

(1)Section 226A shall not apply in relation to a later disposal made by the trustees of a settlement if the trustees have elected that section 691(2) of the Taxes Act (certain income of maintenance funds for historic buildings not to be income of settlor etc) shall have effect in the case of—

(a)the settlement, or

(b)any part of the settlement,

in relation to each year of assessment in which a relevant earlier disposal is made.

(2)In this section “relevant earlier disposal”, in relation to a later disposal, means an earlier disposal in respect of which a claim mentioned in section 226A(1)(c) is made.

(3)This section is to be construed as one with section 226A.”.

Commencement

7(1)The amendments in paragraphs 1(2) and 4(4)(a) of this Schedule have effect in relation to any notice given on or after 10th December 2003.

(2)The amendments in paragraphs 2(2), 3(2), 4(2), (3), (4)(b) and (5) and 5 of this Schedule have effect in relation to disposals made on or after 10th December 2003.

(3)Subject to paragraph 8 of this Schedule, the amendments in paragraphs 2(3) and 6 of this Schedule have effect in relation to gains or parts of gains accruing on later disposals (within the meaning of the section 226A inserted by paragraph 6 of this Schedule) made on or after 10th December 2003 (whenever any relevant earlier disposal was made).

(4)In sub-paragraph (3) above “relevant earlier disposal”, in relation to a later disposal (within the meaning of the section 226A inserted by paragraph 6 of this Schedule), means an earlier disposal in respect of which a claim mentioned in subsection (1)(c) of that section is made.

Transitional provision

8(1)This paragraph has effect where section 226A of the Taxation of Chargeable Gains Act 1992 (c. 12) (as inserted by paragraph 6 of this Schedule) (“section 226A”) applies in circumstances in which—

(a)the relevant earlier disposal, or

(b)if there were two or more such disposals, each of them,

was made before 10th December 2003.

(2)Section 226A shall have effect subject to the following modifications.

(3)In subsection (2), omit “not” and at the end insert “subject to the modifications set out in subsections (2A) to (2C) below”.

(4)After subsection (2) insert—

“(2A)Section 223 (1) shall not apply.

(2B)For the purposes of section 223(2)(a) and (3)—

(a)the dwelling-house or the part of the dwelling-house in question is to be taken not to have been the individual’s only or main residence during the post-commencement period or any part of that period, and

(b)the words “but inclusive of the last 36 months of the period of ownership in any event” shall not have effect in respect of so much of that period of 36 months as falls within the post-commencement period.

(2C)In subsection (2B) above “post-commencement period” means the period beginning on 10th December 2003 and ending on the date of the later disposal.”.

(5)In subsection (3), omit “never” and at the end insert “subject to the modifications set out in subsections (2A) to (2C) above”.

(6)In this paragraph “relevant earlier disposal”, in relation to a later disposal, means an earlier disposal in respect of which a claim mentioned in subsection (1)(c) of section 226A is made.

(7)This paragraph is to be construed as one with section 226A.

(8)Subsections (5) and (6) of section 223 of the Taxation of Chargeable Gains Act 1992 apply in relation to the subsection (2B)(b) treated as inserted by sub-paragraph (4) above as they apply in relation to subsections (1) and (2)(a) of that section.