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TonyTax
TonyTax, Tax Consultant
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My house has previously declared my main residence. 23 years

Resolved Question:

My house has previously declared my main residence. 23 years ago I bought flat near to my work and now I've retired I want to sell it. How can avoid/reduce Capital Gains Tax? I'm told that I can declare the flat my main residence: how do I do this and how soon could I sell it?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Can you confirm whether you made an election by writing to HM Revenue & Customs within two years of acquiring the flat to tell them that your house was your main home. Has the house been let since you bought the flat?
Customer: replied 3 years ago.

To pay for the increased mortgage when I bought my flat in 1991 I started letting rooms in both properties. At some point, I cannot be certain if it was within 2 years, I declared my house as my main property to qualify for rent-a-room there. I still let rooms in my house now.


 

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 3 years ago.
Hi again.

If you made the election for your house to be treated as your main home within two years of acquiring the second, then any variation of that election will only be effective from a maximum of two years before such a variation is made as you can read here.

The rent a room scheme requires you to live in the home for which you are claiming rent a room relief as you can read here. Given that you appear not to have been living in the house, you have probably claimed it incorrectly.

Take a look at HS283 for information on the main residence and CGT. As far as CGT on the flat is concerned, that probably has been your main residence and will almost certainly be treated as such if you did not make the main residence election within two years of acquiring it, notwithstanding the fact that you have claimed rent a room relief for the house.

If you did make the election within two years of acquiring the flat, then it gets complicated. You will qualify for exemption from CGT for the period you lived in it plus the last 18 months of ownership or the last 24 months of ownership if you vary the main residence election. As part of the property has been let, a proportion of the gain will not qualify for main residence relief if that occurred during the period you can claim that relief for. However, you should qualify for letting relief which will reduce any taxable gain.

I hope this helps but let me know if you have nay further questions.
Customer: replied 3 years ago.

More complicated than I thought!


 


I bought the flat to be near my College, however every weekend, half-term and holiday I stayed at my house, to be with my son who normally lived with his mum after she moved out. My time was shared almost evenly between house and flat.


 


About 5 years later when sorting out tax due on rooms let, I successfully argued that my house was my main residence, and have been using rent-a-room since, although I've yet to submit my 2013-14 tax return.


 


I hope this clarifies my situation.

Expert:  TonyTax replied 3 years ago.
It seems like that you didn't make the main residence election within two years of acquiring the flat which is a good thing from a CGT point of view but a sharp eyed tax official may spot the rent a room claim and argue that you cannot have it both ways.

If I were you, I'd have an accountant or tax adviser look at the whole thing in detail which I'm unable to do from here. Either way the calculation of the taxable part of any gain you make on the flat will be complicated by the fact that you let part of it and that fact will restrict any claim for main residence relief, though some letting relief will be due as you can read in HS283.
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Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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