CGT on Primary Residence? – Don’t be too hasty to judge

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2 weeks ago

CGT on Primary Residence? – Don’t be too hasty to judge

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CGT on Primary Residence? – Don’t be too hasty to judge

A question on Capital Gains for a Primary Residence when I’ve never strictly permanently lived in the property in question…don’t be too hasty to judge, (I hope) there are a few mitigating factors!

My mother sold the family home back in 2008, gifted me a sum of money and with that (and other private savings) I bought a flat in my name in mid-2010, taking out a residential mortgage. The initial plan was for us to live together, but life changed and given she was suffering from ill health and approaching 70 (hence the reason I took out the mortgage) the reality is that she went on to live in the flat rent free until she passed away in 2015.

At all times my mother was the only person permanently living in the flat and as such she was the only person listed on the Council Tax for that period. However, the Ground Rent and Maintenance Charges payable on the property were in my name and of course, I continued to maintain the residential mortgage until I recently sold the flat (Nov-2017). In Nov-2013 I bought a house with my wife, before then I had rented various properties with her. At point of purchase of this house, I believe it became my Primary Residence, (whereas previous to this, it was the flat my mother was living in).

So my question is, given the flat I bought was not a buy-to-let, I received no income from it and when I purchased it, it was the only property I owned, can I reasonably claim that at the time of purchase (Apr-2010) up until the day I bought my house with my wife (Nov-2013), that this flat was my primary residence and I can use that period to calculate a relief on my capital gains relating to its sale? This is despite the fact that (although it was my original intention) I never lived in the flat with my mother for longer than a week at a time as I almost immediately moved into rented accommodation with my girlfriend (then wife) instead.

My interpretation of the situation is that, by definition, given it was a residential mortgage, was not intended as an investment property and it was the only property I owned between Apr-2010 and Nov-2013, it has to be classed as my primary residence. I’m hoping there are some parallels with, e.g. a husband that buys a property with his wife and then immediately moves out (for some sad reason) and rents a flat for a period of time whilst they attempt to sell the family home. At point of sale of that family home, surely the fact he has not been living in the house does not change the fact that it is his primary residence (also akin to when a couple separately own two properties and have to elect which one is their primary residence as soon as they get married and move in together).

Thanks in advance for any advice or further reading you can point me in the direction of. I’m aware that when it comes to filling in my tax return for this year I will undoubtedly require professional advice, but any comments ahead of that meeting will no doubt be very useful.

Dustin

Comments

Mark Alexander

2 weeks ago

Hi Dustin

On the basis that you never actually lived in the flat and you were never registered on the Electoral Role or as resident for Council Tax I think you will have great difficulty in claiming PPR relief.

Presumably you were registered for Council Tax elsewhere too?

HMRC have a particularly useful online CGT calculator which is free to use on an anonymous basis. Please see the link below.

https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/

If you are non -resident the outcome will be far more favourable, and HMRC also have an online calculator for that -- see link below.

https://www.tax.service.gov.uk/calculate-your-capital-gains/non-resident/

John Frith

2 weeks ago

I've not looked at this issue for some time, so I may be out-of-date, but it used to be that if there were two or more properties that could legitimately be claimed as a main residence, then you could nominate which one HMRC would use. Do you remember doing that? Unfortunately you couldn't backdate it, so in the absence of it being nominated, then it would be based on which one you could prove you lived in.
I would look into whether you could nominate it as your Primary Residence for the current 17-18 tax year up to when you sold it, to get some relief.

Monty Bodkin

2 weeks ago

I've had similar in a property I'd never lived in (although my reason was employment related). Get your accountant to look into this;

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64500

ESC/D21 provides
Where for any period an individual has, or is treated by the Taxes Acts as having more than one residence, but his interest in each of them, or in each of them except one, is such as to have no more than a negligible capital value on the open market (eg a weekly rented flat, or accommodation provided by an employer) the two year time limit laid down by section 222(5)(a), TCGA 1992 for nominating one of those residences as the individuals main residence for capital gains tax purposes will be extended where the individual was unaware that such a nomination could be made. In such cases the nomination may be made within a reasonable time of the individual first becoming aware of the possibility of making a nomination, and it will be regarded as effective from the date on which the individual first had more than one residence.
Therefore in cases where the interest is such as to have no more than a negligible capital value ESC/D21 extends the time limit until a reasonable time after the person is first made aware that a nomination is needed.
In practice an individual will not normally be aware of the need for a nomination until a residence is sold and a computation of the gain accruing is submitted. So the time limit for making a nomination should be extended for a reasonable period after the computation has been submitted and you have explained the need for a nomination.

paul thomason

2 weeks ago

Reply to the comment left by Mark Alexander at 03/04/2018 - 15:06
you can claim a dependant relative and its capital gains tax free

paul thomason

2 weeks ago

hs 283 please look at internet


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