My sister owned a flat as her main residence between 18th April 2011 and 9th November 2012. 1. The property was completely refurbished and remodelled between April 2011 and 29th May; during this period the property was uninhabitable. 2. The property was sold at a gain of circa £150,000, of which £75,000 was paid out to the Project Manager for running the refurbishment project, leaving a net gain of £75,000. 3. She has no dependants and does a lot of travelling around; i.e. she has a somewhat transient lifestyle. 4. During the period of ownership she split her time between various places; some at her parents’ home near Basingstoke, some at her parents’ home in London, regular travel abroad, and the rest of her time at the flat in question. 5. The time that she spent at her parents’ home in Basingstoke is related to her work where, at the time, she jointly ran the family business of breeding and competing event horses with her mother. She has no financial interest in her parents’ home. 6. Because of the fact that she was not at the London flat very often, she decided to let it out on a short-term basis (fully furnished) to earn some extra income, and stayed there in between times, when she was in London. 7. She owns more than one property but did not formally notify HMRC that this flat was her main residence. My questions relate to Capital Gains Tax, Private Residence Relief and also the Letting Relief subsection. This is all covered under HMRC Manual: http://www.hmrc.gov.uk/manuals/cgmanual/CG64200c.htm: 8. Whilst she did not nominate the flat as her private residence to HMRC within the required time limits, on the facts it would appear to have been her main residence as the only other property she owned was a flat that was fully rented out an AST. She has no financial interest in the family homes, so it would appear that they cannot be her main residences under “CG64470 - Private residence relief: only or main residence: an interest in a dwelling house is a requirement” – see: http://www.hmrc.gov.uk/manuals/cgmanual/cg64470.htm. Please comment as necessary. 9. I cannot see in the HMRC manual, referred to above, a specific example relating to my sister’s situation – they all assume a period of occupancy by the owner as their main residence, followed by a period of rent – but I do believe that she is entitled to Private Residence Relief. Please confirm your view, with reasons. 10. Let us assume that PRR does apply, how should the tax be calculated on the £75,000 gain? The property was owned for a period of 571 days, of which 317 days were let out. Regards ***** *****
Thanks for your question - I am Sam and I am one of the Uk tax experts.
I would need to know the actual dates this was her main residence (the time she physically lived there) as this will then form the consideration of any private residence relief due.
Did she conduct all aspects of her life from this London flat (so registered address with HMRC, National Insurance office, bank, dentists, electroral roll, doctors etc - and was council tax paid by your sister throughout the period of ownership?
Did she spenfd any time at the other property - or was let out throughout the period of ownership of this new property (so from April 2011 to 9th Nov 2012)
I also would need the dates that the flat was let out - and clarification that this rental income was declared to HMRC as although your provide total number of days - I need to see how this forms a pattern.
I also need to know about the £75000 paid to the project manager as this seems a large figure for a refurb - perhaps you could also advsie the purchase price, the actual work undertaken and the selling price.
I also have a concern that as this property was sold back in Nov 2012 - has this capital gain ecen been declared to HMRC? Or are they asking after the sale of this property under enquiry?
I can then formally advise the relevant reliefs due (if any)
Please use numbered bullet points in your reply using the same chronological notation as I am using below - this makes it easier for me to cross reference: