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Peter, Chartered Tax Advisor
Category: Tax
Satisfied Customers: 81
Experience:  Director at PDS Tax Limited
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I am concerned about the rules regarding capital gains tax.

Customer Question

Hi. I am concerned about the rules regarding capital gains tax. My wife and I own two properties. Our main home is in Cornwall. We also keep a flat in the South east which I use due to work commitments and travel from main airports etc. From my perspective I see the Flat and the House in Cornwall equal in terms of them been my main home. I spend more time in the Flat. My wife spends most of her time in Cornwall again due to her work commitments as an Artist. for family reason we are planning to sell both properties and relocate to one property somewhere on the South Coast, Dorset, Hampshire or West Sussex. We are concerned that one of the property sales will be subject to CG tax. However is there any exemption rules bearing in mind that neither property has been used at any time as a holiday home. Thanks
JA: What are the assets or property for this capital gain?
Customer: dont really understand that question
JA: Anything else you want the Accountant to know before I connect you?
Customer: No its just that issue, where do we stand with CG
Submitted: 2 months ago.
Category: Tax
Expert:  Peter replied 2 months ago.

Hi, my name is ***** ***** I am a Chartered Tax Advisor. I am reviewing your query and will reply shortly.

Expert:  Peter replied 2 months ago.

This is a fairly common situation: you have and use a larger main home and a Pied-à-terre simultaneously. I personally am in exactly the same situation as you.

As you are likely to be aware, dwellings that are used as a main home qualify for principal private residence relief which has the effect of making the capital gain relating to the period(s) that you have resided in the property exempt from capital gains tax (CGT).

Unfortunately married couples can only claim exemption from CGT from in relation to one property at any one time, even though in reality both properties may meet the definition of a ‘main residence’ for CGT purposes. This means that you will not be exempt from the sale of both properties.

The only way to maximise the availability of private residence relief is to make a main residence nomination, whereby you declare which of the properties is your main residence, within two years of the acquisition of the latest property. This would allow you to allocate the exemption against the property which has/will have the larger gains, or just to secure the ‘final period exemption’.

However no election can be made after two years, and if no election is made then the main residence which attracts the relief is determined on whichever is the better candidate for the main residence based on fact (which for you would appear to be Cornwall).

I would recommend that you formally engage with a tax advisor or accountant to help you calculate the gain when you do sell the properties as I would guess the amounts of money involved will be large. The rules are quite complicated and there are other more minor reliefs that you should concentrate on securing which will reduce the amount of CGT payable. I appreciate this only a small consolation.

If you have any follow up questions, I am happy to help. Otherwise please consider a 5 star rating for my answer.

Expert:  Peter replied 2 months ago.

I hope my answer was helpful. If you have any further queries please let me know.

I look forward to hearing from you.

Kind regards, Peter