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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15940
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Bought house Aug 13 for £820k, my second home (first home I

Customer Question

Bought house Aug 13 for £820k, my second home (first home I have for over 14 years and never let out). Offer received now £1215k on this second home. Lived in property from Aug 13 to April 14, then Rented out May 14 to now. Can elect this one as primary residence as I have 2 years to inform hmrc. I understand PPR = 8 months actual residence + last 18 months, therefore full PPR releif on gain? therefore No CGT? Am I dreaming?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me why you lived in the second property for such a short period please.
Customer: replied 2 years ago.

Hi - I am asking on behalf of another person, Chris, so I don't know, but I can ask Chris. It may be that the family preferred their original home and moved back. Let me know why you are asking the question - I can get back to Chris and ask

Thank you

Expert:  TonyTax replied 2 years ago.
I'm asking because I like to be aware of all the circumstances and HMRC might ask the same question. Was the second home put up for sale by the owner? If so, when? Alternatively, did the owner receive an unsolicited offer for the property? How far apart are the two properties?
Customer: replied 2 years ago.

Hi - As I thought - the family moved back to their original home because they preferred their original home.

Thank you

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer. It will take a while.
Customer: replied 2 years ago.

Hi - is it possible to email me a quick answer and then follow it up with your draft. Does CGT apply under the circumstances?

Thank you,

Expert:  TonyTax replied 2 years ago.

Hi again.

I'm assuming that the second property and its land does not cover more than half a hectare.

From the point at which you have more than one property available to you to live in, you have two years to make an election for one of the properties to be treated as your main residence to avoid having the decision made for you, based on the facts. You could make such an election but it will only cover the period from August 2013 to April 2014.

From May 2014, the second property was let so you ceased to have more than property available to you to live in. Such an election will expose part of any gain you may make on a futre disposal of the first property to CGT. So long as you sell the second property within 18 months of moving out, you will escape CGT on the whole gain.

You could choose not to make the election as you lived in the property for 8 months and, I assume, you moved your life there. I also assume that you did not move there to make a quick profit as if you did, HMRC could try to claim that it was never your intention to make the second property your medium to long term home and to seek to tax the gain. If no election was made and HMRc did not enquire into your case, then so long as you sell within 18 months of moving out, you will escape CGT on the whole gain. The fact that you changed your mind because you preferred your old home should not stand against you.

On balance, you will probably be better off making the election for the second property to be treated as your main home, albeit only for 8 months so that HMRC cannot intervene. However, I have heard of cases where they have tried to intervene where the property that the election is being made for was up for sale.

Take a look here, here, here and here for more information on the main residence and CGT.

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

Expert:  TonyTax replied 2 years ago.
I have to go out for a while but will be back a little later to answer any follow up questions that you may have.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Hi just a quick follow up - If no election was made and HMRc DID enquire into my case, the second home sold within 18 months (offer already in place in in process of being sold) of moving out - do I still escape CGT on the whole gain OR IS IT JUST TOO RISKY NOT TO MAKE THE ELECTION within the 2 years allowed AND EXPOSED?

Thank you.

Expert:  TonyTax replied 2 years ago.
So long as you are happy to successfully argue if you need to that it was your intention to live in the second property for much longer than you actually did, that is was never your intention to make a quick profit but you simply changed your mind, you don't need an election. Either way, 8 months of gain on the first property will be exposed so from that point of view you may as well make the election.
Customer: replied 2 years ago.

Hi - is it possible for you to draft the content of the election and email me back. I am still resistant to make the election for the second property as it may raise questions when it seems unnecessary, especially as I am happy and not concerned about the 8 months gain on the first property. Final thought Smile

thank you

Expert:  TonyTax replied 2 years ago.
Just google "main residence election template letter". There are plenty to choose from.