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TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 17609
Experience:  International tax
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Hello We need some rather urgent capital gains tax advice

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We need some rather urgent capital gains tax advice and hope you will be able to help.
My husband and I own the two flats (there are just the two dwellings) in a converted Victorian house.
My husband bought the top flat in 2009, I was already in situ having bought the lower flat in 2003.
We married in September 2011.
We would like to sell both flats. The upper flat will go on the market for £450k and the lower flat for £425k.
My first question is are we liable for CGT?
If we are liable for CGT, it is my (layman's) understanding that in order to limit the liability to just one flat, we could backdate our preferred choice of primary residence.  Currently, I am working under the assumption that would be the lower flat.  Assuming I have calculated correctly, the amount to pay on the top flat would be at 28% due to my husband's higher tax bracket.
However, this is based on the aforementioned assumptions.  Hence, in the case of a CGT liability, we would need to know whether we can back date the primary residence to just one flat, and which flat we are able to claim as primary residence.
Can you advise what (if any) or CGT would be?
Thank you in anticipation of your reply
You can not really back date your choice on which home is your primary residence. The rule is actually that "If you live in - not just own - more than one property you can 'nominate' one as your main home.You must make your nomination within 2 years of the date from which you change the number of properties you live in."
You had a second home in September 2011. You could nominate either as your main home if you were living in both, but you must have done so by September 2013.
So you as a couple do own 2 homes but do you live in each? You married in 2011 so which flat did you live in from then on? Did you use one of the flats for any other purpose such as letting?
As it appears right now, you would be allowed to claim primary residence on the flat that was used from 2011 as your primary residence. HMRC will decide which property to treat as your main home based on the facts, because you missed the date to tell them which you nominate.
You asked are we liable for CGT, yes you will be. The flat that was not your residence from 2011 on. When you're married or in a civil partnership and own 2 or more homes between you, any nomination must be made jointly. It must be signed by both of you. You're only entitled to Private Residence Relief on one home between you unfortunately.
I hope this information is useful and that it could have been more to what you hoped for.
Customer: replied 3 years ago.

Thanks for your speedy reply.

We actually live in both of them, but both are still separate flats, they have separate mortgages, utilities and council tax. So HMRC will choose which flat we lived in or we can say that we lived in the bottom flat (which in effect we do).

Can you advise the calculations so we can work out how much we were liable to pay? The bottom flat was purchased for £175k and the upper flat for £220k.

Thanks for your help

Hello again,
HMRC will most likely accept your explanation of which flat you lived in as your primary home.
You generally take the disposal proceeds (usually the amount received) and deduct your costs and reliefs. This gives you the net gain or loss. You are also allowed your annual exempt amount. The Annual Exempt Amount for individuals for 2013-14 is £10,900.
If you've spent extra money to buy, sell or improve your property, you can deduct certain costs.
Costs you can deduct include:
fees or commission for professional advice or services, for example, Capital Gains Tax valuations, solicitors' and estate agent or advertising fees
improvement costs to increase the value of the property - but not normal maintenance costs such as repairs or decorating
Stamp Duty Land Tax and VAT (unless you can reclaim the VAT)
You may want to use the HMRC page to calculate your true gain.
Customer: replied 3 years ago.

Thank you again.

Just on the backdating bit, I found this last night, is this old information?

'TP writes:Where a taxpayer has two residence available for his use, the question of which one is treated as the main residence for capital gains tax is determined on the facts. However, the taxpayer can put the matter beyond doubt by electing which of the two residences is to be the exempt one for tax purposes. The election has to be made within two years of an additional residence being available and can be back dated to that date. The property nominated does not have to be the one that is used the most, it just has to be available and used by the taxpayer.'

And one final question, would it be possible that we would get charged Cgt on both flats?


That information is what I explained in my first post. You had 2 years from 2011 to declare your main residence. You and your husband would have needed to sign and declare which. The 2 years passed in 2013. The back dating means you can say within 2 years which and then the 2 years is also included in the time. You could declare now that you are using one or the other and the time would be included. If you have not ever declared you can say now and then when you sell that one will be excluded from CGT. If you do not then you would pay but only on the flat that is not your residence.

No, one or the other is your primary residence so you would not be charged on both.

Customer: replied 3 years ago.

Thanks ever so much Robin. You've put my mind at rest. Great service.

Thanks again


You are most welcome.
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