Principal Private Residence Relief: new conditions must be met
On 6 April 2015 the Finance Act 2015 will come into force resulting in non-UK residents having to meet new residence qualification conditions in order to be eligible for principal private residence relief from capital gains tax. The conditions will also apply to UK residents wishing to claim tax relief on disposals of properties outside the UK.
The conditions state that any tax year during which a property has been owned by an individual will not qualify for the relief if either of the following situations applies: the individual was not resident in the territory where the dwelling-house is situated (territorial residence test) or if he spent fewer than 90 days in the dwelling-house in the tax year (90-day test).
You will fail the territorial residence test if you are tax resident in a territory outside the UK for half or more than half of a tax year.
In order for the 90-day test to be satisfied one of three situations must apply. Either you were present at midnight on at least 90 occasions in part of the property in the tax year; or you were present at midnight on a pro-rated number of occasions in a partial tax year; or your spouse or civil partner was present at midnight in part of the property on at least 90 occasions in the relevant tax year.
HMRC will publish guidance on the application of the rules later this year.