How To Lose Principal Private Residence Relief

However, in the real world, there are always complications. Here are a few of the pitfalls you may not be aware of:

1. You are a property developer and bought the property to sell it on

   As a developer, you may have moved into the property whilst you did it up, but if you bought it for that specific purpose, you may lose your relief as HMRC will see it as a commercial transaction.

   HMRC don't seem to enforce this rule often but will if an individual is under investigation for some other reason. However, owning the property personally is less risky than if you own it through a property development company.

2. You're not really living there

   There have been a couple of cases where the owner only lived there for a couple of weeks, or in fact, only claimed they lived there, so you can't have more than one property and try to claim the relief on the one you don't really live in.

   You can only get Principal Private Residence Relief on one property, and that covers married couples too who, for obvious reasons, HMRC believe need to live together. If you're getting married, it may be worth one partner selling their property before the big day to ensure the relief applies to the sale.

3. You're working elsewhere for an extended period

   Again, HMRC could refuse the relief if you've been out of the country for an extended period or even just working elsewhere in the United Kingdom. Any period of time longer than 3-years should trigger a warning bell, though they will look favourably if you lived in the property immediately before and after the absence.