The demise of the principal private residence (PPR) election

For many years those fortunate to own more than one home have been able to elect which one qualifies as the PPR for capital gains tax (CGT) purposes. The election must be made within 2 years of the beginning of the period where an individual has 2 or more homes. Once the election is made it can be varied. Many individuals have benefitted with a clear anticipation of future plans for the properties leading to the ‘right’ elections being made to minimise future CGT.

The proposal outlined in this year’s Budget that non UK residents would be subject to CGT on the sale of UK residential property, interestingly introduced the possibility that the PPR election may in fact be withdrawn for all. Concern was raised in the consultation process that the new rules for non- residents would be avoided by use of the PPR election. The suggestion to block this loophole is to remove the availability of the election but in order that such a strategy is not deemed discriminatory then it has been suggested that the PPR election may be removed for both UK residents and non-residents. In the absence of an election it will be up to HM Revenue & Customs to decide based on the facts of each case which of the taxpayer’s properties will qualify for PPR relief. We will wait to see whether these proposals progress.