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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15712
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hello, I have two properties, i bought one 10yrs ago (prop

Customer Question

Hello,

I have two properties, i bought one 10yrs ago (prop A)and have rented it out for the last six months. I have lived in the second poperty for 3.5 yrs but am now selling it to live in property A. Unfortunately I did not inform hmrc which property was my main residence. If i complete my sale in the 2013/14 year i presume that i will need to notify hmrc of the capital gains and claim relief in my 2013/2014 tax return which I will need to do for my six months of rental income. However, if i complete on the 7th april, will I need to notify Hmrc of my sale at all as it is the sale of my main residence as i shouldn't have to do a tax return that year (2014/15)?

Many thanks in advance
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you confirm that you have lived in the second property for the entire period of ownership?
Customer: replied 2 years ago.
I have lived in both properties up until six months ago, but certainly I would say, because my work was near prop B that B ihas been my main residence for the 3.5yrs.
Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 2 years ago.
Hi again.

Regardless of when you sell the second property, I would be inclined to report the disposal because of the nature of your occupation of it and the fact that you also spent time in the other property (A).

Assuming you bought the second property 3.5 years ago, that it has never been let, it is closer to where you worked, that it was your address for bills and other post, that you regarded it as your main home and spent more time there than in property A, you should have no problem claiming main residence relief. I'd disclose the gain in a tax return and claim the relief so that you cannot be accused by the tax office of hiding it.

Had you not owned another property in which you had spent time during your ownership of the second property, I would have said that there was no need to report the disposal as there would have been no doubt about which was your main home.

I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 2 years ago.
This is just to let you know that I will be away from my desk for a while but will be back to answer any follow up questions you may have.
Customer: replied 2 years ago.
Did you get my follow up question?
Expert:  TonyTax replied 2 years ago.
I'm sorry I cannot see the follow up question. Could you post it here again please.
Customer: replied 2 years ago.
The follow up question was somehow lost. However, I am found out two days after your answer that the Cgt tax laws change on the 7th April 2014- I wish you had informed me of this.
Expert:  TonyTax replied 2 years ago.
I last posted on this 5 days ago and I did mention the changes to the rules that take effect on 6 April 2014 but from reading through the dialogue, that appears not to have shown up in my original answer. I mention the CGT changes in all property related CGT questions I answer here at the moment without fail.

It is the date of the exchange of contracts that is the tax point for CGT purposes, not the completion date. You asked specifically about the requirement to report a disposal which I answered in the light of your owning more than one property.

The change in the rules from 6 April 2014 affects a property which has not been your main home for part of all the last 36 months of ownership. Based on what you told me, I said that you should be able to claim main residence relief for property B.
Customer: replied 2 years ago.
if i complete on the 7th april, will I need to notify Hmrc of my sale at all as it is the sale of my main residence as i shouldn't have to do a tax return that year (2014/15)?

My question was more about when I would have to report it to Hmrc , I think your answer should have been:
If you complete on 7th April you will still have to report it in the 2013/14 return if you exchanged in that year and bear in mind the Cgt rules change if you exchange after 5th April etc...
Expert:  TonyTax replied 2 years ago.
Normally, there is no need to report a disposal of a property that you considered to be your main residence for the entire period of ownership. The fact that you did not make an election for one of the two properties to be treated as your main residence within two years of acquiring the second complicates matters as you say you used them both.

If you exchange contracts after 5 April 2015 so that for tax purposes the sale was in the 2014/15 tax year (the completion date is not the sale date) then you have two choices:

1 Do what most people do and don't report the disposal of a property that you considered to be your main residence for the entire period of ownership, notwithstanding the fact that you did not make the formal main residence election. As this property was closer to your work, I think that it is a fair view to take.

2 Take the belt and braces approach and report the disposal in a tax return but with no taxable gain by reason of your claim for main residence relief. If you decide you want to report the disposal, you will need to ask the tax office to issue a tax return to you if one is not issued on 6 April 2014.

Based on what you have told me, I'd go for option 1.

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