What is PRR?
Private residential relief (PRR) allows taxpayers to sell their homes without incurring capital gains tax (CGT). However, to qualify for PRR the property must have been the taxpayer’s main residence at some point during the 18 months prior to the property being sold (the final exemption period).
The new proposition: what does PRR mean for expats?
HMRC are proposing that the final tax-free period of 18 months is cut to nine months. It claims that reducing the qualifying period will prevent landlords from fraudulently claiming the private residential relief in order to reduce their CGT liability.
What are the criticisms of the new private residential relief?
The Chartered Institute of Taxation (CIOT) has expressed concern that homeowners whose properties take a long time to sell could unwittingly and unfairly become subject to a much larger CGT liability, if the reduced private residential relief ruling is upheld.
Aparna Nathan QC, Chair of CIOT’s CGT & Investment Income Sub-committee, commented in a press release, “If HMRC have serious concerns about abuse of the PRR, they could consider conducting a broader consultation about the objectives and effectiveness of the relief.” *
Nathan noted that HMRC should provide evidence of their evaluation to establish that nine months is sufficient time for genuine house sellers to complete a move to a new property particularly in the light of regional variations in property values and market.
Expat financial advisers are also keen to ensure that new expats do not become disproportionately affected by any new private residential relief rules. It can take a long time to move from the UK to a residence abroad, and this can sometimes result in a protracted property sale process.
Plan Your Wealth with Blacktower Financial Management
Blacktower Wealth Management has offices right across Europe, including in Sweden, the Netherlands and Germany, so there’s always a financial advisor to assist you with private residential relief concern.
We have more than thirty years’ experience of helping our clients meet their financial, pensions and retirement goals, while all the time taking full account of their unique personal and cross-border situations. We aim to help you understand all the necessary and relevant conditions, liabilities and regulations that may affect your short and long term wealth management as an expat.
For more information about how we may be able to help you, contact us today.
* https://www.tax.org.uk/media-centre/press-releases/press-release-ciot-suggests-review-private-residence-relief
Disclaimer: Blacktower Financial Management is not a tax adviser and independent tax advice should be sought. The above does not constitute advice.
Disclaimer: This communication is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
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Expat financial advice is a must for any British expat living in Portugal, Spain or Italy to ensure they meet their cross-border taxation obligations while also making the most of the financial growth and preservation opportunities available to them.