In 1991, the Government introduced a provision allowing PPR relief to be claimed for the last 36 months of ownership of a residential property, thereby exempting all gains arising during the period of occupation and the last 36 months of ownership from CGT. In line with previous announcements by the Government, the period of 'deemed occupation' exemption from CGT has now been reduced to the final period of 18 months of ownership. This applies to disposals of residential properties where contracts for sale are exchanged on or after 6 April 2014, or, if exchanged before then, when completion takes place after 5 April 2015, or where other types of disposal, such as gifts, are made on or after 6 April 2014.

The reason for the reduction has been explained on the grounds that the “deemed occupation” period was originally intended to cover situations where the property was proving difficult to sell. With the (partial) recovery of the housing market, HMRC considers that 18 months is sufficient.

The 36 month period will be retained for disabled persons, spouses and civil partners of disabled persons, and certain long term residents of care homes.