Trust receives income from unconnected parties

Trust owns a residence and a beneficiary is permitted to occupy the residence under the terms of the trust and does so throughout ownership. The beneficiary’s unmarried partner occupies the property and pays a commercial rent to the trust.

Can the trustees claim full main residence relief on the sale of the residence?

Our initial analysis is that if the beneficiary is able to occupy the whole residence then this should be ok and this is the case where the unconnected party doesn’t pay a rent.

In my experience (as a tenant, not a landlord), privately owned accommodation for university letting generally have locks on bedroom doors. Would we therefore expect HMRC to challenge a main residence relief claim for these scenarios?.

Would it help if the beneficiary has a key for each bedroom and has access at any time they should wish?

Russell Smith

If you have not already done so, you may wish to refer to the notes in the CGT manual at CG64702 on Private residence relief: letting: lodger, SP14/80. It seems to me that the same principles should apply where property is occupied under a settlement.

Diana Smart
Gordons LLP