Private residencesU.K.
222 Relief on disposal of private residence.U.K.
(1)This section applies to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in—
(a)a dwelling-house or part of a dwelling-house which is, or has at any time in his period of ownership been, his only or main residence, or
(b)land which he has for his own occupation and enjoyment with that residence as its garden or grounds up to the permitted area.
(2)In this section “the permitted area” means, subject to subsections (3) and (4) below, an area (inclusive of the site of the dwelling-house) of 0.5 of a hectare.
[F1(3)Where the area required for the reasonable enjoyment of the dwelling-house (or of the part in question) as a residence, having regard to the size and character of the dwelling-house, is larger than 0.5 of a hectare, that larger area shall be the permitted area.]
(4)Where part of the land occupied with a residence is and part is not within subsection (1) above, then (up to the permitted area) that part shall be taken to be within subsection (1) above which, if the remainder were separately occupied, would be the most suitable for occupation and enjoyment with the residence.
(5)So far as it is necessary for the purposes of this section to determine which of 2 or more residences is an individual’s main residence for any period—
(a)the individual may conclude that question by notice to the inspector given within 2 years from the beginning of that period but subject to a right to vary that notice by a further notice to the inspector as respects any period beginning not earlier than 2 years before the giving of the further notice,
F2(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6)In the case of a man and his wife living with him—
(a)there can only be one residence or main residence for both, so long as living together and, where a notice under subsection (5)(a) above affects both the husband and the wife, it must be given by both, F4...
F5(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)In this section and sections 223 to 226, “the period of ownership” where the individual has had different interests at different times shall be taken to begin from the first acquisition taken into account in arriving at the expenditure which under Chapter III of Part II is allowable as a deduction in the computation of the gain to which this section applies, and in the case of a man and his wife living with him—
(a)if the one disposes of, or of his or her interest in, the dwelling-house or part of a dwelling-house which is their only or main residence to the other, and in particular if it passes on death to the other as legatee, the other’s period of ownership shall begin with the beginning of the period of ownership of the one making the disposal, and
(b)if paragraph (a) above applies, but the dwelling-house or part of a dwelling-house was not the only or main residence of both throughout the period of ownership of the one making the disposal, account shall be taken of any part of that period during which it was his only or main residence as if it was also that of the other.
(8)If at any time during an individual’s period of ownership of a dwelling-house or part of a dwelling-house he—
(a)resides in living accommodation which is for him job-related F6..., and
(b)intends in due course to occupy the dwelling-house or part of a dwelling-house as his only or main residence,
this section and sections 223 to 226 shall apply as if the dwelling-house or part of a dwelling-house were at that time occupied by him as a residence.
[F7(8A)Subject to subsections (8B), (8C) and (9) below, for the purposes of subsection (8) above living accommodation is job-related for a person if—
(a)it is provided for him by reason of his employment, or for his spouse by reason of her employment, in any of the following cases—
(i)where it is necessary for the proper performance of the duties of the employment that the employee should reside in that accommodation;
(ii)where the accommodation is provided for the better performance of the duties of the employment, and it is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees;
(iii)where, there being a special threat to the employee’s security, special security arrangements are in force and the employee resides in the accommodation as part of those arrangements;
or
(b)under a contract entered into at arm’s length and requiring him or his spouse to carry on a particular trade, profession or vocation, he or his spouse is bound—
(i)to carry on that trade, profession or vocation on premises or other land provided by another person (whether under a tenancy or otherwise); and
(ii)to live either on those premises or on other premises provided by that other person.
(8B)If the living accommodation is provided by a company and the employee is a director of that or an associated company, subsection (8A)(a)(i) or (ii) above shall not apply unless—
(a)the company of which the employee is a director is one in which he or she has no material interest; and
(b)either—
(i)the employment is as a full-time working director, or
(ii)the company is non-profit making, that is to say, it does not carry on a trade nor do its functions consist wholly or mainly in the holding of investments or other property, or
(iii)the company is established for charitable purposes only.
(8C)Subsection (8A)(b) above does not apply if the living accommodation concerned is in whole or in part provided by—
(a)a company in which the borrower or his spouse has a material interest; or
(b)any person or persons together with whom the borrower or his spouse carries on a trade or business in partnership.
(8D)For the purposes of this section—
(a)a company is an associated company of another if one of them has control of the other or both are under the control of the same person; and
(b)“employment”, “director”, “full-time working director”, “material interest” and “control”, in relation to a body corporate, have [F8the meanings given by Chapter 2 of Part 3 of ITEPA 2003].]
(9)[F9Subsections (8A)(b) and (8C) above] shall apply for the purposes of subsection (8) above only in relation to residence on or after 6th April 1983 in living accommodation which is job-related [F10for the purposes of that subsection].
(10)Apportionments of consideration shall be made wherever required by this section or sections 223 to 226 and, in particular, where a person disposes of a dwelling-house only part of which is his only or main residence.
Textual Amendments
F1S. 222(3) substituted (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 59(2)
F2S. 222(5)(b) repealed (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 59(3)(a), Sch. 41 Pt. V(10)
F3Words in s. 222(5) repealed (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 59(3)(b), Sch. 41 Pt. V(10)
F4Word in s. 222(6) repealed (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 59(4), Sch. 41 Pt. V(10)
F5S. 222(6)(b) repealed (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 59(4), Sch. 41 Pt. V(10)
F6Words in s. 222(8)(a) repealed (with effect in accordance with Sch. 4 para. 18(4) of the amending Act) by Finance Act 1999 (c. 16), Sch. 4 para. 17(2), Sch. 20 Pt. III(7)
F7S. 222(8A)-(8D) inserted (with effect in accordance with Sch. 4 para. 18(4) of the amending Act) by Finance Act 1999 (c. 16), Sch. 4 para. 17(3)
F8Words in s. 222(8D)(b) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 213 (with Sch. 7)
F9Words in s. 222(9) substituted (with effect in accordance with Sch. 4 para. 18(4) of the amending Act) by Finance Act 1999 (c. 16), Sch. 4 para. 17(4)(a)
F10Words in s. 222(9) substituted (with effect in accordance with Sch. 4 para. 18(4) of the amending Act) by Finance Act 1999 (c. 16), Sch. 4 para. 17(4)(b)
223 Amount of relief.U.K.
(1)No part of a gain to which section 222 applies shall be a chargeable gain if the dwelling-house or part of a dwelling-house has been the individual’s only or main residence throughout the period of ownership, or throughout the period of ownership except for all or any part of the last 36 months of that period.
(2)Where subsection (1) above does not apply, a fraction of the gain shall not be a chargeable gain, and that fraction shall be—
(a)the length of the part or parts of the period of ownership during which the dwelling-house or the part of the dwelling-house was the individual’s only or main residence, but inclusive of the last 36 months of the period of ownership in any event, divided by
(b)the length of the period of ownership.
(3)For the purposes of subsections (1) and (2) above—
(a)a period of absence not exceeding 3 years (or periods of absence which together did not exceed 3 years), and in addition
(b)any period of absence throughout which the individual worked in an employment or office all the duties of which were performed outside the United Kingdom, and in addition
(c)any period of absence not exceeding 4 years (or periods of absence which together did not exceed 4 years) throughout which the individual was prevented from residing in the dwelling-house or part of the dwelling-house in consequence of the situation of his place of work or in consequence of any condition imposed by his employer requiring him to reside elsewhere, being a condition reasonably imposed to secure the effective performance by the employee of his duties,
shall be treated as if in that period of absence the dwelling-house or the part of the dwelling-house was the individual’s only or main residence if both before and after the period there was a time when the dwelling-house was the individual’s only or main residence.
(4)Where a gain to which section 222 applies accrues to any individual and the dwelling-house in question or any part of it is or has at any time in his period of ownership been wholly or partly let by him as residential accommodation, the part of the gain, if any, which (apart from this subsection) would be a chargeable gain by reason of the letting, shall be such a gain only to the extent, if any, to which it exceeds whichever is the lesser of—
(a)the part of the gain which is not a chargeable gain by virtue of the provisions of subsection (1) to (3) above or those provisions as applied by section 225; and
(b)£40,000.
(5)Where at any time the number of months specified in subsections (1) and (2)(a) above is 36, the Treasury may by order amend those subsections by substituting references to 24 for the references to 36 in relation to disposals on or after such date as is specified in the order.
(6)Subsection (5) above shall also have effect as if 36 (in both places) read 24 and as if 24 read 36.
(7)In this section—
“period of absence” means a period during which the dwelling-house or the part of the dwelling-house was not the individual’s only or main residence and throughout which he had no residence or main residence eligible for relief under this section; and
“period of ownership” does not include any period before 31st March 1982.
224 Amount of relief: further provisions.U.K.
(1)If the gain accrues from the disposal of a dwelling-house or part of a dwelling-house part of which is used exclusively for the purpose of a trade or business, or of a profession or vocation, the gain shall be apportioned and section 223 shall apply in relation to the part of the gain apportioned to the part which is not exclusively used for those purposes.
(2)If at any time in the period of ownership there is a change in what is occupied as the individual’s residence, whether on account of a reconstruction or conversion of a building or for any other reason, or there have been changes as regards the use of part of the dwelling-house for the purpose of a trade or business, or of a profession or vocation, or for any other purpose, the relief given by section 223 [F11may be adjusted in a manner which is just and reasonable].
(3)Section 223 shall not apply in relation to a gain if the acquisition of, or of the interest in, the dwelling-house or the part of a dwelling-house was made wholly or partly for the purpose of realising a gain from the disposal of it, and shall not apply in relation to a gain so far as attributable to any expenditure which was incurred after the beginning of the period of ownership and was incurred wholly or partly for the purpose of realising a gain from the disposal.
Textual Amendments
F11Words in s. 224(2) substituted (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 60
225 Private residence occupied under terms of settlement.U.K.
Sections 222 to 224 shall also apply in relation to a gain accruing to a trustee on a disposal of settled property being an asset within section 222(1) where, during the period of ownership of the trustee, the dwelling-house or part of the dwelling-house mentioned in that subsection has been the only or main residence of a person entitled to occupy it under the terms of the settlement, and in those sections as so applied—
(a)references to the individual shall be taken as references to the trustee 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 the inspector under section 222(5)(a) shall be a joint notice by the trustee and the person entitled to occupy the dwelling-house or part of the dwelling-house.
226 Private residence occupied by dependent relative before 6th April 1988.U.K.
(1)Subject to subsection (3) below, this section applies to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in, a dwelling-house or part of a dwelling-house which, on 5th April 1988 or at any earlier time in his period of ownership, was the sole residence of a dependent relative of the individual, provided rent-free and without any other consideration.
(2)If the individual so claims, such relief shall be given in respect of it and its garden or grounds as would be given under sections 222 to 224 if the dwelling-house (or part of the dwelling-house) had been the individual’s only or main residence in the period of residence by the dependent relative, and shall be so given in addition to any relief available under those sections apart from this section.
(3)If in a case within subsection (1) above the dwelling-house or part ceases, whether before 6th April 1988 or later, to be the sole residence (provided as mentioned above) of the dependent relative, any subsequent period of residence beginning on or after that date by that or any other dependent relative shall be disregarded for the purposes of subsection (2) above.
(4)Not more than one dwelling-house (or part of a dwelling-house) may qualify for relief as being the residence of a dependent relative of the claimant at any one time nor, in the case of a man and his wife living with him, as being the residence of a dependent relative of the claimant or of the claimant’s husband or wife at any one time.
F12(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6)In this section “dependent relative” means, in relation to an individual—
(a)any relative of his or of his wife who is incapacitated by old age or infirmity from maintaining himself, or
(b)his or his wife’s mother who, whether or not incapacitated, is either widowed, or living apart from her husband, or a single woman in consequence of dissolution or annulment of marriage.
(7)If the individual mentioned in subsection (6) above is a woman the references in that subsection to the individual’s wife shall be construed as references to the individual’s husband.
Textual Amendments
F12S. 226(5) repealed (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 61, Sch. 41 Pt. V(10)