ACCA Taxation (F6) Practice Exam

What is the formula for calculating principal private residence relief during part occupation?

1. Gain x period of ownership/Total period of occupation

2. Gain x period of occupation/Total period of ownership

3. Gain x total period of ownership/Total period of sale

4. Gain x period before sale/Total period of ownership

The correct answer is: Gain x period of occupation/Total period of ownership

The formula for calculating principal private residence relief during part occupation is based on the amount of time the property was actually occupied as a primary residence versus the total period of ownership. In this context, the correct choice reflects this relationship accurately. To break it down, the principal private residence relief allows homeowners to exclude some or all of the capital gains realized on the sale of a property that has been their main residence for some time. When a property is occupied both as a main residence and for other purposes (such as letting), the relief needs to be apportioned based on periods of actual residence compared to periods of ownership overall. Thus, by using the formula where the gain is multiplied by the period of occupation (the time the property was used as a main residence) and divided by the total period of ownership, it precisely allocates the gain that can be relieved based on occupancy. This approach emphasizes that relief applies to the duration of actual use as a main residence rather than the entire period of ownership, supporting the correct calculation of capital gains tax liability. The other options do not align with this correct interpretation of the timeframes involved in ownership and occupation.