Capital gains tax (CGT) for carers
Normally, when a person sells or disposes of their only or main residence, they get relief from capital gains tax on any resulting gain – private residence relief (PRR). However, if part of the residence has been used for business purposes, relief is restricted on that part. We explain further below.
Originally, both foster carers and adult placement carers were denied PRR on the proportion of their residence that was set aside for the use of the children or adults in their care, because they were regarded for tax purposes as running a business. Following a campaign by LITRG and TaxAid in 2004, foster carers were granted full exemption but adult placement carers were not, because of the exclusive nature of their service users’ occupation of rooms or areas in the residence.
However, the law was subsequently changed so that whenever a home is sold or otherwise disposed of on or after 9 December 2009, adult placement carers can claim unrestricted capital gains tax PRR on any gain accruing to them from the disposal of their private residence. This applies even if they have at any time looked after adults placed with them under an adult placement scheme (or in Scotland an adult placement service, or in Northern Ireland an adult placement agency).
Accordingly, both foster carers and adult placement carers can now qualify for full PRR when they come to sell their residences in which they have looked after the children or adults in their care.