The Capital Gains Tax "benefit" Of Your Home Office Being Invaded By The Family From Time To Time

• Published date: 22 October 2020
• Subject Matter: Tax, Capital Gains Tax
• Law Firm: Withers LLP
• Author: Mr Charlie Tee, Natasha Oakshett and Harry Cousens

Capital gains tax ('CGT') is payable by individuals on gains realised when they dispose of property, including real estate. For residential property, the presently applicable rate of CGT is 28% for higher rate taxpayers, and this even applies to individuals who are non-UK tax resident. However, where an individual occupies a residential property as their only or main residence throughout the period of ownership, he will be eligible for principal private residence relief ('PPR') which provides relief from CGT on gains arising on disposal of the property.

PPR will be available in part when a property has been an individual's only or main residence at some point during their ownership. This is calculated on a time apportionment basis. Where PPR is available for part of the ownership period, the last 9 months of ownership will also benefit from PPR (see Withers' previous article - HMRC has recently reduced this period from 18 months ).

However, there are various circumstances where HMRC may seek to deny PPR, such as if the property has been acquired wholly or partly for the purpose of realising a gain from its future disposal or if the property has been rented out (although 'lettings relief' may apply where the landlord is in shared occupation with the tenant).

This article highlights a potential pitfall which may become more relevant in the era of Covid-19, especially given the pressure on the Treasury to raise funds and since potential changes to the CGT rate (if not the wider regime) are currently much talked about.

The Home Office

With millions in the UK having been asked to work at home since March, people's homes have become their offices. Indeed, many will have reconfigured their home to suit this new requirement and, to really take advantage of the new work-life balance, it may have been a necessity to create dedicated working space, free from interference from other family members. In this instance, homeowners should be aware of s224 TGCA 1992, a legislative provision which states that those parts of a home which are "used exclusively for the purpose of a trade...