MIRAS vs Main Residence

[Bejay]

Please help me understand Mortgage Interest Relief at Source (MIRAS). Does claiming MIRAS on a mortgaged property determine that property is my main residence, or can I decide an alternate property. I'm not clear the linkage between MIRAS and main residence.

[mullet]

Precisely what year or years are you thinking about? MIRAS died in April 2000. I recall that the relief was only available in respect of an occupied residence, and I remember a case where MIRAS was effectively clawed back (by an adjustment to allowable interest in property accounts) when a former residence was let. In broad terms MIRAS and occupation of a property as a residence should have gone hand in hand.

[Bejay]

It’s quite complex, at the time negative equity hit a lot of people and letting was a mystery. In 1987 I bought a studio flat as main residence and claimed MIRAS on the mortgage. I changed job and moved away in 1989 to live with my mother permanently but the flat would not sell, it was left vacant. In 1991 I started to let the flat. I only had the one mortgage so continued to claim MIRAS and in 1995 the tax office wrote to me and removed MIRAS as I was still renting the flat after 4 years. At the time one could continue to claim MIRAS for a limited period in case you moved back again. I did not move back and sold the flat in 2000.

Earlier I gained beneficial interest in my Mothers property in 1988, the mortgage was in Mum’s name and I helped pay the mortgage. I didn’t realise at the time I had a beneficial interest and property taxes are dependent on beneficial interest.

In hindsight continuing to claim MIRAS was a very bad idea, the small saving was wiped out by having to pay much more in income tax on rental income up to 1995; I didn’t realise I could set aside mortgage interest payments against rental income and pay no tax, and the tax office kept quiet about that little gem.

I wanted to know if I can claim my Mothers house as my main residence from 1991 when I started to rent my flat despite claiming MIRAS for my flat.

Sorry about this it’s very complex.

[King_Maker]

In your circumstances, the answer is probably Yes.

[Peter D]

Why do you want to "claim my Mothers house as my main residence " Is your Mum still living there. If she sells it and the deeds and mortgage are in her name there will be no tax involved. "I gained beneficial interest in my Mothers property in 1988" was this documented and what makes you think you gained an interest. Regards Peter

[Bejay]

That’s good news King_Maker

In regard to Peters enquiry. My Mother bought her council House with discount in 1988 with a mortgage in her name; my brother and I paid the mortgage with my brother as guarantor. I can’t remember if there is a Declaration of Trust, this is something I have to find out, maybe get printouts from the land registry. Anyway I moved back home in 1989 to live with Mum permanently and Mum lived rent free. In 1997 my Mother and I arranged joint ownership and in 2000 I bought my Mothers share and became sole owner. My mother continued to live rent free until her death last year.

I thought joint ownership would give a starting point for main residence and that would be 100% from 1997 but if I have beneficial interest in 1988 then I miss the first 3 years (1988 – 1991) if I sell in the future.

Sorry about all the details.

[Peter D]

Moving in does not make it your PPR however being joint makes it your qualifying PR on your share but more importantly when it became solely in your name then it was your OMR and on disposal there will be no CGT liability. I am sure you have posted this scenario before. Regards Peter

[Bejay]

Yes, your right Peter it was an earlier post. But I read later that to calculate CGT relief you need the date you bought or acquired the property so I thought that was when I first paid the mortgage in 1988 and I had to investigate that.

What’s being said here though is the date I acquired the property for qualifying permanent residence (PR) is when I first gained legal title much later in 1997 by joint ownership and the date for only or main residence (OMR) is 2000 when I gained sole ownership. From the earlier post the open market value is 56.5k calculated using open market valuations in 1997 and 2000. So I have the main ingredients for CGT; purchase date = 1997 and valuation = 56.5k

Sorry I’m long winded.