Lettings Relief for tenant farmers

[morley82]

Situation-tenant farmer and wife have lived in a farm house as required under the terms of the farm tenancy agreement and have done for over 25 years.
They purchased a house approximately 15 years ago in a nearby town for their retrement, which they have let out since they purchased it. They have never lived in this house.

This house qualifies as, and has been claimed as their PPR for CGT purposes since it was purchased as they have to live in the leasehold farmhouse.

They have now purchasesd a second property and wish to move the PPR election to this property.
Will the first property qualify for lettings relief?

Some guidance indicates that you have to have "lived" in the property, whereas other guidance indicates that you can claim letting relief if you can "claim PPR".

[mullet]

Lettings relief follows private residence relief, even if it is based on deemed residence under the provisions of Section 222(8) TCGA 1992 (as that section specifically states that Sections 223-226 shall apply as if the dwellinghouse were occupied as a residence).

Turning to the question of the second property, that is interesting and I'm sure that the matter has come up on the forum in the past (but I can't find it). I guess that the author of the legislation did not anticipate multiple property ownership. I am not sure of the answer, but I feel that HMRC would not be happy with a succession of "deemed" residences with the owners' intentions changing as often as they changed their socks.

The whole point of the legislation is to allow farmworkers, vicars, lighthousekeepers etc to stay on the property ladder and have somewhere to live after retirement. Replacing one deemed residence with another was never an issue, but what happens with two concurrently owned properties?

[maths]

Think mullet might be referring to :

http://www.taxationweb.co.uk/forum/cgt-army-2-rented-properties-t32757-20.html?hilit=JOB%20RELATED%20ACCOMMOF=DATION

where the topic was somewhat amusingly and interestingly flogged to death !!

[maths]

Without wishing to enter into another mind-blowing discussion i would suggest:

1. lettings relief, as mullet points out, will be available assuming that during occupation of the job related accommodation the owned property was intended to be occupied as a sole or main residence.

2. however, if another property is purchased which it is intended is to be occupied as a sole or main residence, the first property being retained and let out but never occupied, it is likely HMRC will seek to ascertain whether the first owned property was in fact ever intended to be so occupied given that it wasn't occupied in fact. If intention cannot be demonstrated satisfactorily then this would mean that the first property would not be deemed to have been occupied as a residence and lettings relief would be denied.

Typically, HMRC investigate where a property intended to be occupied following termination of the JRA is not in fact so occupied.

[King_Maker]

JRA is the only exception to the requirement of actual occupation for a property to qualify as a residence.

The draftsman does appear to have allowed for multiple residences in section 222(8)(b) TCGA 1992 :

"(b)intends in due course to occupy the dwelling-house or part of a dwelling-house as his only or main residence,"

A relevant Election would seem the most logical way of changing a PPR. However, it might be difficult to envisage someone intending to reside in 2 properties in the same road - aging or ill family member, perhaps?

IMHO, the first property should qualify for Lettings Relief, as it has qualified as a PPR.

[morley82]

Thanks for your help on this matter it has helped clarify the issues.

I wonder if many people have actually had experience of making the claim and HMRC's repsonse.

I take the point that if you act like a flipping MP! swapping elections and on multiple properties, HMRC will have a much stronger case to contend that it was never the intention to occupy a property.

In this case the client bought the first house with the intention to occupy it. They are now in a much stronger financial position ( forget petrol -look at the current price of wheat, though the price of fertilizers have also gone through the roof) and have acquired another larger property. As a result their intentions have changed and that they will eventually use the larger property as their retirement home.

I feel their is less risk of HMRC being able to show that it was not their intention to retire to the first propoerty as they have held it as their only property for 15 years.

Thanks again for the input.

[maths]

In this case the client bought the first house with the intention to occupy it. They are now in a much stronger financial position ( forget petrol -look at the current price of wheat, though the price of fertilizers have also gone through the roof) and have acquired another larger property. As a result their intentions have changed and that they will eventually use the larger property as their retirement home.

Assuming "intention" proof not a problem i would suggest that no election re the two owned properties is necessary. On the acquisition of the second property intention to occupy as a sole or main residence has changed from one property to another and thus the first property can no longer be treated as occupied as a residence for PPR relief purposes under s222(8). Hence (ignoring the JRA) there are not two residences requiring an election to be made.

I feel their is less risk of HMRC being able to show that it was not their intention to retire to the first propoerty as they have held it as their only property for 15 years

Helps, but per se not conclusive; much more difficult to prove intention if not at the end of the day actually carried out but not of course impossible.