Q) I have heard recently that there are proposed changes for individuals selling their private residences.  What are these changes?

A) There were two announcements in the recent Autumn Statement In December 2013 about capital gains tax and private residences.  There are two proposed changes, one relating to gains by non-residents and a change to the main residence exemption concerning the final 36 months of ownership.

The final exemption change has already been written into the draft legislation.  For many years the final period of ownership of a private residence that has attracted exemption has been 36 months.  The change will reduce the final period exemption to 18 months.

An 18 month period will allow for genuine bridging cases ie where an individual owns only one property and wishes to sell before buying a second.  If there is a delay in the sale of the first the 18 month period provides the necessary time and relief required to deal with these straight forward situations.

Difficulties will potentially arise however for example for separating couples (whether married or not) with the previous 36 month period giving time to arrange financial matters in these situations.  While there is a provision that is dealing with the overlap of an existing property there is no such relief for the first period of ownership of a new property.  The only measure available to deal with this is a HMRC concession but this is quite restrictive and often the circumstances stipulated do not apply.

A new string to the main residence exemption is to assist disposals by disabled persons or persons in care homes.  This broadly provides that where a disposal is made by a disabled person or a long term resident in a care home or their spouse or civil partner, then the final period of exemption will remain at 36 months.  This will be the case as long as the individual does not have an interest in another dwelling house or an entitlement to occupy a dwelling house under a trust where main residence relief would be available.

The second announcement relates to capital gains tax for non-residents.  Future gains will be charged to capital gains tax on the sale of residential property only.  As yet there is nothing to suggest that the charge will apply to high value properties only.  There is very little detail as yet about this measure.  It is expected that there may be a rebasing to April 2015

The main residence exemption change will apply from April 2014 and the change for non-residents in April 2015.