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bigduckontax, Accountant
Category: Tax
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My wife and I put down 10% flat that was being built

Customer Question

My wife and I put down 10% for a flat that was being built in 2012 (flat A). In Nov 13, we purchased another flat for buy to let (B) and started working on its refurbishment. In May 2014, we completed the purchase of flat A and moved in (we were renting prior to that). But we stayed there only for just over a month as we felt it was too small. So we rented that flat in July that year and moved to flat B. Now we want to sell flat A, given that we only lived there for a short period, can we claim it was our home and claim the 18 month residential relief as well as the letting relief. Do I need to send a letter to HMRC to nominate it as my main property? If that does not work, does it work if I move to and make flat A my main property before I sell it? Thank you.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. For the last 18 months of ownership you are deemed to be in residence even if this is not the case. Even HMRC accept that a residence cannot be as easily disposed of as a second hand car for example. Remember that you have an Annual Exempt Amount (AEA), non cumulative, of 11.1K to offset any gain liable to Capital Gains Tax (CGT). Your total ownership time of Flat A is say 24 months, knock off the 18 leaves 6 / 24 [25%] of the gain exposed to tax. The tenor of your question indicates that the flat was jointly owned so of the gain only half each applies to you, less the AEA o you will probably be completely out of the CGT wood anyway. You will probably have to follow up on this question, maybe with detail as to purchase and sales data.
Customer: replied 1 year ago.
Thanks for the answer. I understand the 11.1k exemption and I am also aware of the 18 months. But my question is 1) do I get the 18 exemption even if I don't prove this was at some point my main home. Also, is that one month in May-June 2014 that I briefly lived in that flat enough to claim it as my main home or do I need to move to that flat now to be able to claim it as my main home. Also for the 40k letting relief, how is that applied. Note that the capital gain can be substantial 150-200k. Thanks.
Expert:  bigduckontax replied 1 year ago.
You do not have to prove it, the 18 month extension of PRR will be given automatically. Flat B was not your main residence; it was being refurbished. Thus Flat A was your sole or main domestic residence. 200K at 25% is 50K, divide by 2 is half each, 25K. Deduct AEA leaves 13.9K, worst case scenario with tax at 28% is a bill of a tad under 4K. However, as you lived in Flat A before letting then your would be entitled to Lettings Relief (LR) up to 40K so there should be no CGT payable anyway. Please be so kind as to rate me before you leave the Just Answer site.