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bigduckontax
bigduckontax, Accountant
Category: Tax
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Can you please clarify the Capital Gains position on

Customer Question

Can you please clarify the Capital Gains position on 'principal residence'. I have a client who owns a property in London but he has never lived there (he has no other permanent address in the UK and lives in rented accommodation). He is proposing to sell the London property, and use the proceeds to buy a property in Scotland, which will be his new permanent address. Can he claim exemption from Capital Gains Tax on the London property, on the basis that he claims it as his main residence?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
, I'm Keith and happy to help you with your question.
The wording of the relevant legislation talks about a person's sole or main domestic residence being entitled to Private Residence Relief (PRR). Note the word 'or' not 'and.' HMRC do not like this being drawn to their attention, their interpretation, wrong, is in my experience, 'and.' In the past there was a massive battle over this where servicemen living in service quarters were deemed by the then Inland Revenue to have their quarter as their 'main domestic residence. Indeed they had got as far as persuading the Ministry of Defence to publish a Defence Council Instruction on the matter. I arrived in Nepal to find the place in uproar over this ruling. A very swift, snotty complaint to the MOD had the Instruction cancelled and the Inland Revenue retired with considerable egg on its face. I was a mere Captain then, but had just completed my first professional qualification.
So, it is your sole or main domestic residence thus PPR, which relieves Capital Gains Tax at 100%, should apply. Warning, you may have a battle on your hands. The gain need not be declared, but I would be inclined to annotate in the 'Notes' section of your annual self assessment tax return to the effect that that you have disposed of your sole or main domestic residence. If you are not required to make an assessment then I would advise you to emulate Brer Fox, ' lay low and say nuffin!'
I do hope I have shown you a way forward in this matter.
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Expert:  bigduckontax replied 2 years ago.
Thank you support.

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