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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15751
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Question is about cgt. My partner bought her own house

Customer Question

hi - question is about cgt.
My partner bought her own house (her main home - only registered in her name), I live in house she used to have as her main residence (registered in both out names). this is my main residence. What is the best way of making it clear to HMRC that out main residences are in different properties so neither of us pay CGT when we sell either property?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.
Assuming that you are not married or in a civil partnership, you are each able to have different main residences for CGT purposes.
Unless an election for one of the properties that an individual has an interest in to be treated as their main residence is made within two years of their having a choice of homes, ie more than one, then the matter of which is the main home is decided on the facts.
You don't have an interest in more than one home so the question doesn't arise as far as you are concerned. However, your tax free period of residence in the house you live in only started the day you acquired an interest in it and your cost for CGT purposes of that interest will be the value of that interest on the day that you acquired it.
Your partner may have a CGT issue as when your name was added to the title deeds of the property that you live in, your partner made a disposal for CGT purposes of part of her interest in that property at the open market value of that share regardless of whether any money changed hands.
Take a look at HS283 for information on the main residence and CGT:
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief
I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Hi Tony1:You mention 'an election for one of the properties that an individual has an interest in to be treated as their main residence'
does that mean that we could tell HMRC which residence is our sole residence meaning that neither property would be liable for CGT when they are sold? - if so how do we do this - is there a tax form we need to complete?2: As things currently stand the house that is my main residence in london is still co-owned by both of us. The other house bought last year (funded by me) is in her name only.Would make any difference for tax purposes if her name is ***** ***** the title deeds of the london property so that this becomes owned just by me (removing any doubt as to which property is the main residence for each of us? What I want to avoid is having to pay between us any cgt on the london property,thanks
Expert:  TonyTax replied 1 year ago.
I'll get back to you in a bit.
Expert:  TonyTax replied 1 year ago.
You cannot always avoid CGT. You really ought to read the rules in HS283 a few times to get a good understanding. I'll give you a brief summary.
The gain for any period that a property has been an individual's main home (they have to have actually lived in it at some time) will be exempt from CGT. In addition, where a property has been the owner's main home at some point, they will be given exemption from CGT for the gain covered by the last 18 months of ownership whatever use it has been put to.
1 "We" doesn't come into it as you are living in separate properties and you are unmarried and not in a civil partnership. Unless you are married or in a civil partnership, you don't make a joint election.
2 When your partner gave you a share of her first house, that was a disposal for CGT purposes whether you paid for that share or not. It may have been covered by main residence relief due to her occupation of the property.
If her name is ***** ***** the deeds of the London property, that will also be a disposal to you for CGT purposes. You need to work out how long your partner lived in the London property and add 18 months to work out what proportion of the first and second gains will be exempt from CGT.
Alternatively, as your partner acquired a second home within the last two years, she could make an election that the first property was her main residence from the date that she first owned two which will cover from that date to her disposing of her interest in it. I would have thought that the entire period of her ownership of the London property will then be covered by main residence relief.
As it is, if she disposes of her share to you, she will be given the last 18 months of ownership as a tax free period in any event and an election may not be necessary.
Assuming you own no other property, the London hone is your main home by default. As you have been living in t since you acquired an interest in it, your share of any gain will be exempt from CGT if you sell it whilst still living in it or within 18 months of moving out.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15751
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
thank you tony, very useful so far. When you say that 'she could make an election that the first property was her main residence from the date that she first owned two' could you tell me how she would do this,ie, is there a form that she could complete for this and if so which one?
Thanks
Expert:  TonyTax replied 1 year ago.
All your partner would need to do is to write a letter to the tax office along the lines of this:
HM Revenue & Customs,
(Address)
(Address)
(Address)
(Address)
Dear Sirs
Private Residence Election
I/We acquired / disposed of a residential property on [date within the last two years]. The address of that property is [address]
In accordance with section 222 (5) of the Taxation of Chargeable Gains Act 1992 I/we give notice that for capital gains tax purposes our property at [address] which was purchased / acquired on [date] is to be treated as my/our main residence with effect from [date (normally current date)].
Yours faithfully,
________________________________
1st taxpayer
________________________________
2nd taxpayer
(if applicable)
The address is here:
https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees
Customer: replied 1 year ago.
thanks tony, do they normally send a reply acknowledging these letters?
Expert:  TonyTax replied 1 year ago.
That's a good question.I suggest you keep a copy of any letter you send to HMRC and send a reminder every 4 weeks until you get a written response. Alternatively, phone them as all post should be scanned into the HMRC computer as soon as it is received.
Customer: replied 1 year ago.
ok will do... HMRC have been voted as the worst organisation that any consumer has to deal with and I'm suspicious that it would get lost in their systems
Expert:  TonyTax replied 1 year ago.
I wouldn't say they are worst. What you need to remember is that we have had three governments in the last 18 years who think that HMRC can be run with three staff and a computer. Seriously, they are just another demoralised government workforce like the NHS nurses.

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