There are special rules if you work overseas (and rules for working away in the UK)
This blog focuses on working overseas. The important thing to make sure you keep good records and tell your accountant!
Office/employment outside UK
TCGA92/S223 (3) (b)
You may allow relief for a period of absence of any length throughout which an individual worked in an employment or office all the duties of which were performed outside the United Kingdom, or a period of absence throughout which the individual lived with a spouse or civil partner who worked in such an employment or office if the conditions set out in CG65046 are fulfilled.
All of the duties of the employment must be performed outside the United Kingdom. You can ignore any return to the United Kingdom for holidays, but you should not ignore any duties which are in practice performed in the United Kingdom even if they are only incidental to the main duties performed outside the United Kingdom.
The purpose of private residence relief is to relieve gains arising on the disposal of an individual’s residence so that the whole of the disposal proceeds are available to be used to buy a new residence of a similar standard. It is not intended to relieve speculative gains or gains arising from development.
The exclusion of speculative or development gains is achieved by TCGA92/S224 (3). It is important to understand the scope and limitations of this subsection so that you can apply it in suitable cases.
The subsection applies
where a dwelling house is acquired wholly or partly for the purpose of realising a gain from its disposal, or
where there is subsequent expenditure on the dwelling house wholly or partly for the purpose of realising a gain from its disposal.
Where the first part of the subsection applies no relief is due on any gain accruing from the disposal of the dwelling house. Where the second part of the subsection applies no relief is due on any part of the gain attributable to the expenditure.
If you plan to develop your property prior to sale it could be worth transferring it to company before any work is carried out, this could help to ensure that any gain to the date of transfer will be exempt from tax.
There is a further potential risk that HMRC may view the property development as a trading activity.
Principle Private Residence Relief (PPR) is useful relief that saves you capital gains tax (18% for basic rate tax payers and 28% for higher rates tax payers) on your main residence, but how does it work, lets take a basic example
Property Purchase Date 30/04/2001
Property Purchase Price £100,000
Date Moved Out 30/10/2010
Letting Start Date 01/11/2012
Date Sold 31/10/2014
Sale Price £200,000
Capital Gains tax calculation
Sale proceeds 31/10/2014 £200,000
Cost (assuming no improvements) -£100,000
Gross capital gain £100,000
Principle Private Residence Relief
Actual Occupation 9.5 Years
Plus last 18 Months of Ownership 1.5 Years
The Property was empty prior to letting
Up to 18 months could be by ‘absence for any reason’
Total period where private residence relief is
available 11.0 Years
Total Period of ownership 13.5 Years
Principle private residence relief
£100,000 x (132 mths/162 mths) £81,481
Gain after principle private residence relief £18,519
01/11/2012 to 31/10/2014 2.0 Years
Lettings relief is to lower of
£40,000 statutory maximum
£81,481 the principle private residence relief in this example
The gain for the letting period
Gain attributable to letting 2/13.5 x £100,000 £14,815
This is the lowest figure
For gains on sales prior to 6 April 2014, PPR is available for the last three years of ownership of a property that has been a main residence at any time. This is the case regardless of whether or not it has been occupied during the last three years of ownership.
But as a result of the 2014 Budget, from 6 April 2014 the automatic exemption from tax on gains in relation to the final years of ownership is now restricted to cover the last 18 months rather than three years.