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The changes to the ‘deemed occupation’ period for the granting of private residence relief (PRR) have been well reported and apply to exchanges of contracts on residential properties after 5 April 2014.
The changes are relevant where the property has not been occupied as the owner’s main residence for the whole of the period of ownership.
Prior to 5 April 2014, the deemed occupation period was the last 36 months prior to sale. This has been reduced to 18 months, but not for all owners. The 36-month period of deemed occupation still applies where the vendor is a disabled person or a long-term resident in a care home.
Disabled persons include those who are mentally incapable and those who receive attendance allowance or disability living allowance at the middle or highest rate. This list is not exhaustive.
It is important to note that residence in warden-controlled flats does not qualify as ‘long-term residence in a care home’; nor does a temporary move to a care home.
In the circumstance in which a family member moves into the disabled person’s property to look after them, it is common for the property, or a share in it, to be gifted to the carer. In this case, no matter what the status of the disabled person, the carer will only qualify for 18 months’ deemed occupation.