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TonyTax
TonyTax, Tax Consultant
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If a person changes their main residence with HMRC to register

Resolved Question:

If a person changes their main residence with HMRC to register a second home as a main residence (to ensure it is correctly classified for CGT purposes in future), whilst living at the first home, would such a change affect the ability to claim for allowable expenses against the lettings gain whilst that second home is being rented out?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you confirm that you when you refer to "allowable expenses" you mean the costs associated with letting a property such as letting agent fees, commissions, repair and maintenance costs etc.
Customer: replied 2 years ago.


Hi,


 


By allowable expenses I'm referring to both the mortgage interest associated with the property - which is where I expect there could be a conflict with it being classed as a main residence and still being able to claim that as an expense- as well as other letting related costs such as agent fees, service charges, commission etc.


 


Many thanks.

Expert:  TonyTax replied 2 years ago.
Thanks for the clarification.

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

Hi again.

A main residence election will only be necessary where you have more than one property available to be lived in by yourself. If you own two properties and one of those properties is let, it cannot by definition be available for you to live in and so a main residence election that is already in place on the newly let property ceases to be valid at the point of letting. Take a look under the heading "Let property" here.

However, where a property has been the owner's main residence at some point during their ownership of it and it has been let, they will be entitled to main residence relief for the period they lived in it as their main home and for the last 18 months of ownership for disposals after 5 April 2014 (36 months for contract exchanges by 5 April 2014) and to letting relief for the period that the property was let. Letting relief is the lesser of:

1 £40,000.

2 the gain for the period the property was occupied by the owner as their main home plus the gain for the last 36 or 18 months of ownership where they were not living there, depending on the contract exchange date and

3 the gain for the period the property was let excluding any part of that period covered by the last 18 or 36 months of ownership depending on the contract exchange date.

Take a look at the HMRC helpsheet HS283 for more information on the main residence and CGT.

Your letting expenses will be fully deductible from the rental income subject to HMRC rules.

I hope this helps but let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15841
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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