As a UK accountant, it’s crucial to guide clients on the various tax planning opportunities available. One such opportunity is Principle Private Residence (PPR) Relief, which provides tax benefits to individuals who sell their main residence. In this blog post, we will explore the concept of deemed occupation and qualified absences, including eligibility criteria and examples. So, let’s delve into the details!
Understanding Deemed Occupation
Under certain circumstances, an individual’s absence from their main residence can still be considered as occupation for tax purposes. This concept is known as deemed occupation. It allows individuals to claim PPR Relief even when they are not physically present in their property. Let’s explore the qualifying absences.
Absence Qualifying as Deemed Occupation
a. 3 Years for Any Reason: Individuals can claim deemed occupation for up to three years, regardless of the reason for their absence. It could be due to travel, work-related commitments, or simply personal circumstances.
b. 4 Years for Employment Elsewhere: If an individual is employed elsewhere and occupies the property sporadically during a four-year period, the absences can still qualify as deemed occupation.
c. Any Period Required to Work Abroad: Individuals who are required to work abroad can claim deemed occupation during their period away from their main residence.
d. Up to 2 Years at the Start of Ownership with Qualifying Delay: If there is a delay in occupying the property at the start of ownership due to qualifying reasons, individuals can claim deemed occupation for up to two years.
HMRC CG64555: Armed Forces
Special considerations apply to members of the armed forces. Under HMRC CG64555, individuals serving in the armed forces are entitled to claim deemed occupation even if they have not occupied the property for the qualifying period.
Letting During Qualified Absence
During a qualified absence, individuals may choose to let their property. In this case, they are still eligible for PPR Relief on the periods of deemed occupation.
CG65050 – Residence before/after period of absence
It is a condition of s223(3) TCGA92 that both before and after the period of absence there must be a time in which the dwelling-house was its owner’s only or main residence unless they were prevented from resuming residence as a consequence of their or their spouse or civil partner’s employment requiring them to live elsewhere. The periods of residence do not have to be immediately before and after the period of absence.
Examples of Absence Qualifying as Deemed Occupation
a. Sarah, an engineer, temporarily moves abroad to complete a project for four years. Her home remains vacant during this period. She can claim deemed occupation for the first three years.
b. John, a member of the armed forces, is posted overseas for three years. Although he does not occupy the property during this time, he is entitled to claim deemed occupation for the entire period.
Understanding the concept of deemed occupation and qualified absences is essential for maximizing Principle Private Residence Relief. By being aware of the eligibility criteria and utilizing these provisions effectively, individuals can ensure significant tax savings.