DTE Tax brief on principle residence reliefs

by **petergibbinson** on Fri Apr 17, 2009 7:54 pm

I just want you to lok at the paragraph from the Tax brief..read what is says in isolation (nothing to do with me)
It is quite clearly worded..are they correct or mistaken?

by **Peter D** on Fri Apr 17, 2009 8:36 pm

Which PAra you have sent me 8 Para's. Regards Peter

by **maths** on Fri Apr 17, 2009 8:55 pm

Section 222 can only be of relevance if a dwelling house

“...is, or has at any time in his period of residence been, his sole or main residence...”

If therefore a dwelling house has never been his sole or main residence then s222(7) is irrelevant in respect of any inter-spouse transfer.

Any inter-spouse transfer in this case would be deemed to be at no loss/gain and the date of transfer would be the actual date of the transfer. There would be no “deeming” of the commencement of the period of ownership on the part of the transferee spouse back to the date of acquisition by the transferor spouse.

On the other hand if a dwelling house:

“...is, or has at any time in his period of residence been, his sole or main residence...”

then section 222(7) may be in point on an inter-spouse transfer if the conditions laid down in 222(7) are satisfied.

One of the conditions (in 222(7)) is that the dwelling house is:

“... their only or main residence....”

This means that (1) the dwelling house must be the sole or main residence for both spouses as is confirmed by the use of the word “their” which otherwise would have been either the word “his” or “her” and (2) it must be such at the time of the inter-spouse transfer (otherwise the words “or has at any time been their sole or main residence” would appear).

It may be that at the date of the transfer the spouses are not living therein and thus the dwelling cannot, de facto, be a residence (let alone a sole or main residence). However, in respect of certain absences (assuming conditions are met) the dwelling may be regarded as their sole or main residence during such periods of absence (even if an election is required as it may be in some cases) and thus the transferee’s periods of ownership in such cases would effectively include those of the transferor spouse.

by **Peter D** on Fri Apr 17, 2009 9:17 pm

Hi Peter

Hope this helps.

Page 11 Para 1 no probs.

Para 2

Yes marriage can trigger a new nomination window if there is a choice of residence in which you live if that is not the home in which you both live together. Your PRR is a matter of fact but as I previously detailed you can nominate if you want to.

Para 3.

This addresses the issue that when they become joint owners of the qualifying residence the spouses ‘share’ of the property does not forfeit the established PRR status of the taxpayer if it is there residence. This is the same ruling as Page 12 Para 2

Para 4

OK

Para 5

OK

Page 12 Para 1.

Allows the no gain, no loss transfer as long as they are living together, thus the change in separation and or divorce.

Para 2

Clearly states there is no problem if you are resident in the property at the time of the transfer.
If the transfer is outwith the residency then the actual position is deemed appropriate even to the extent that if the spouse never living in the property then there is no relief. Note the last sentence refers to “a husband or wife” not a husband and wife. This is where maths well over with suggesting that a new wife could even claim PRR.

This is also the gotcha that caught out inter spousal transfers to lock in Indexation last year where an owner transferred a rental property that used to be his or her home previously, and the 100% transfer lost the original owner both PPR and letting relief, I must have dealt with at least 15 -18 of these. That is when HMRC announced that they would grant the indexation without an inter spousal transfer.

Para 3 and 4

Divorce and Separation.

Regards

Peter

by **Peter D** on Fri Apr 17, 2009 9:21 pm

My mistake, that was supposed to be a reply to an email not a reponse within the thread.

Regards

Peter

by **petergibbinson** on Sat Apr 18, 2009 4:48 am

Thankyou Maths!
Your quote:

However, in respect of certain absences (assuming conditions are met) the dwelling may be regarded as their sole or main residence during such periods of absence (even if an election is required as it may be in some cases) and thus the transferee’s periods of ownership in such cases would effectively include those of the transferor spouse.

Correct we qualify for the absence rules, and have now nominated from 01 March 2008 (and as long as we move back in eventually) hence it is regarded as our main residence. Hence 222 (7) (a) applies! That's the crux of the problem, I think you are right..Peter D thinks you need to be owner occupiers..I think that would defeat the object of having the absence rules in the first place...

I think that DTE paragraph is mixed up at the end, and I'm not sure they are reading 222 (7) properly....i.e it says if it isn't the main residence at transfer (but had been in the past) "i.e the transferee is still deemed to have acquired the property backdated to the date of acquisition by the transferor but entitlement to reliefs is based upon the transferees own postiton" so if the transferee lived there as only home for 2 years previously (and the transferor for & years) the transferee would get 2 years relief not the 7.

by **petergibbinson** on Sat Apr 18, 2009 8:00 am

& in previous post should read "7"

by **Peter D** on Sat Apr 18, 2009 9:18 am

"Peter D thinks you need to be owner occupiers..I think that would defeat the object of having the absence rules in the first place.."

Read Para 2 Page 12 above.

Para 2

Clearly states there is no problem if you are resident in the property at the time of the transfer.
If the transfer is outwith the residency then the actual position is deemed appropriate even to the extent that if the spouse never living in the property then there is no relief. Note the last sentence refers to “a husband or wife” not a husband and wife. This is where maths fell over with suggesting that a new wife could even claim PRR. No way, she has never even lived there.

Regards

Peter

by **petergibbinson** on Sat Apr 18, 2009 10:15 am

OK this is getting silly...
If you "inherit" the ownership history you inherit the "relief" history

let me quote paragraph on page 12 again...

"If the residence is the main residence of the couple at transfer there will be no problem (YES, BY VIRTUE OF ABSENCE RULES AND BACKDATED 01 MARCH 2008 JOINT NOMINATON)
(as ownership will be treated as starting with the beginning of the transferor's ownership period and be based on the transferor's position, i,e the transferee inherits the transferor's ownership history and relief entitlements)

Note AND RELIEF ENTITLEMENTS

I would appeciate Maths thoughts.

by **petergibbinson** on Sat Apr 18, 2009 10:41 am

Sorry that last post should say if you "inherit" the owenrship history you inherit the "relief" history; if it is the main residence at the time of transfer (periods of absence meeting certain conitions included as main residence)

However according to the DTE paragraph on page 12, IF it isn't the main residence at the time of transfer (but has been before) then the transferee (my wife in this case) "inherits" the ownership period but NOT the "reliefs" In that case it is the actual periods of her having lived there (which are now residence periods as the ownership is "inherited from the first acquisition date")

So to be honest it matters not as my wife and formerly girlfriend lived there as only home from 1999 until moving to Dubai..and ESC/D3 treats us as one during the absence anyway.

This is all irrelevant as I (and 3 other professionals (1 CTA, 2 "Big 4" accountants) I have consulted and paid for their advice) believe that the absence period is a period of resdidence anyway. Peter D disagrees, that is his perogative and I respect that.