CG65660 | Private residence relief: dependent relative: sole residence

The periods which qualify for relief are those in which the house is occupied as the sole residence of the dependent relative. This is required by s226(1) TCGA92 and may be contrasted with the relief available to individuals and to the trustees of settled property where the relief is available in respect of an individual’s, or a beneficiary’s, only or main residence. There is no opportunity to elect for a property to be regarded as the residence of a dependent relative which qualifies for relief.

The purpose of the legislation is to allow relief to a person who buys a home for their dependent relative who would otherwise have nowhere to live. The extra relief would not be needed if the dependent relative had another residence available.

Not more than one dwelling-house can qualify for relief as the residence of a dependent relative at any one time except where one dwelling-house only qualifies for relief by virtue of the final period exemption of s223(2) TCGA92, see CG64985+. Where a person fulfils the conditions at CG65550 for only part of the period of ownership, and so is only a dependent relative for part of the period of ownership, relief should only be allowed for the period during which the person was a dependent relative.

For example, an individual buys a dwelling-house in January 1984 which is occupied as the sole residence of his parents who are each aged 50. His father dies in January 1985 and his mother continues to live in the dwelling-house. If the other conditions for relief are fulfilled relief will only be available from January 1985. After that date the individual’s mother is a dependent relative within CG65579. Before that date neither mother nor father are dependent relatives and so relief cannot be due.

Example

D acquired a dwelling-house in June 1985 and sold it in December 1992 realising a gain of £50,000 before relief. The house was provided rent-free and without any other consideration as the sole residence of D’s widowed mother from 1 June 1985 to 1 October 1989 when she died.

The private residence relief due under s226 TCGA92 is computed as follows:

· period of ownership is June 1985 - December 1992 = 91 months

· period of sole residence of dependent relative is June 1985 - October 1989 = 53 months

· final period allowed by s223(2) TCGA92 at the time of disposal = 36 months (see CG64985+).

The relief due is:

((53 + 36)/91) x £50,000 = £48,902

The chargeable gain is £1,098 (£50,000 - £48,902) before the annual exempt amount.