We are an Irish family living in Belgium since 2014. We bought our house in Dublin in 2012 and lived in it for a couple of years before we moved to Belgium, where we rent the property we live in. The house in Dublin remains our principal private residence.
We now plan to move to the UK and are worried about having to pay Capital Gains Tax on the sale of our house. Will it be considered our principal private residence if we have not been living there? It seems from the Revenue website that this is only the case if we move back there before selling. There is no information on how long you need to live there. But since the last 12 months of ownership count as if you live there anyway, maybe it’s okay?
Answer: Barry Flanagan, director of Taxback.com
In most circumstances, when you did not reside in the property for the full period of ownership, part of the gain on disposal would be liable to Capital Gains Tax, as the primary method of relief known as PPR (Principal Private Residence) relief would be restricted proportionately. However, certain periods of absence from living in the property can be deemed to be periods of occupation or residence, and full relief may be available.
Firstly, the last 12 months of ownership are automatically regarded as a period of occupation, regardless of circumstance. This exemption was intended to facilitate disposal of the property and was prompted by situations where an individual may move out prior to a sale being agreed or finalised. This relief is always available.
Another such qualifying period of absence, which may be deemed to be a period of occupation, relates to living abroad for work purposes for any period, irrespective of length.
But in order the full period of absence to be treated as period of occupation, the individual must work abroad as a condition of their employment and they must occupy the residence as a PPR both before and after the absence.
So it is extremely important for the house to be reoccupied again, prior to sale. If the house is not reoccupied, the risk is that Revenue would disallow this claim and only the exemption for the last 12 months of deemed occupancy would remain.
As you noted, Revenue have not defined how long you need to reoccupy the home for. Nor does any definitive guidance exist in this respect. So we are left in the unsatisfactory position of having to make a judgment on what may be considered a reasonable period of reoccupation. Clearly, the longer the better.
Given the increase in value that most properties have experienced in the period from 2012 to 2018, a prudent approach should be taken to ensure that the gain related to the four years spent in Belgium is exempted from CGT. Therefore, if possible, it would seem prudent to reoccupy for a period of at least three months (though again, this has not been tested).