PPR Relief

As most practitioners are aware principal private residence relief is a CGT relief that allieves a taxpayer from having to pay CGT on selling their home. Like many reliefs, there are of course rules and exceptions. One that generally comes up in practice are clients trying to “game” the relief in circumstances where they own two or three properties and wish to ensure that the property that is currently being sold constitutes a PPR so as to avail of the exemption. So at times, clients try and shoehorn facts so as to avail of the relief. Obviously, solicitors have to advise clients about the qualifying conditions for all reliefs, and one of the main ones when it comes to PPR is that one can only claim relief with respect to the period that you are living in the property. Take the following example

Example

Yvonne has lived in Carlow since 2005, and bought a rental property in Dublin in 2007. She moved to Dublin in 2020 during the pandemic and now wishes to sell her property in Dublin. She comes to you claiming that she will be exempt from CGT on the sale because she has lived in the Dublin property as her PPR. Unfortunately that will not work for Yvonne and she will only be allowed a proportional exemption from CGT for the time living at her property. And so she will receive a discount of 4/17 of her final CGT bill, because she lived in the property as her main family home for four years of her 17 years of ownership. However the converse works for her. If she sells her house in Carlow, even though she is not living there as her main residence she gets 15/19 reduction in CGT because she lived in the house in Carlow for 15 of her 19 years of ownership as her main home.

Nursing Home

One issue which can arise from time to time is that, on occasion, a person living in a nursing home may have to sell their family home. However, that person will not be penalised from a CGT point of view for the years not living in their family home where the cannot live their because they are either

(a) receiving care in a hospital, nursing home or convalecent home; or

(b) resident in a retirement home on a fee paying basis.

So there is a degree of fairness in the system.

The Fair Deal

There can be good reason though to switch family homes for an unrelated nursing home reason. If we take Yvonnes example, it could well be the case that Yvonne’s Dublin property greatly exceeds in value her property in Carlow. Her husband is in a nursing home and for the fair deal Yvonne can legitimately claim that her Dublin property is her main home for the scheme, thus bringing that home into the 3 year cap and thus saving on contributions towards the fair deal.

Principal Private Dwellinghouse Relief

A parallel rule also exists with respect to dwelling house relief. This is the relief from inheritance if you inherit the house you are living in and you own no other house. One of the criteria for the relief is that the beneficiary of the house (sometimes referred to as the successor or disponee) must have lived in the house as their main residence in the three years immediately prior to the date of the inheritance. Periods of absence are permitted for “physical or mental ill health”. While one may live in a nursing home due to physical or mental ill health, one knows plenty of residences of nursing homes who have good physical and mental health, but, it is thought that residence in a nursing home also does not disqualify you from principal private residence relief.

Example

Catherine and Jacinta are sisters and lived in their house in Swinford all their lives. They each have will the house to each other. Jacinta goes into a nursing home in March 2022 and Catherine dies in January 2024. Even though Jacinta has not been living in the home for the three years immediately before the death of Catherine, it is understood that Jacinta will still get the benefit of the relief.

Hope this helps and remember if you have any tax, probate or capacity queries please email me at colm@thepropatehub.ie or make an enquiry through the website.