PPR, CGT, SDLT and probably more!

by **AW489** on Sat Nov 05, 2011 8:04 pm

Hi all,
I'm hoping someone can give me some advice as all the threads I've read on similar topics have given a "nearly" answer that doesn't quite fit our circumstances!
Current Situation:
Married couple with mortgage free house that is currently rented out. We live in military accommodation, thus this house is currently the PPR.
Owned house was lived in by one spouse until 2007; this spouse is the sole name on the deeds.
We wish to buy a house to move into once the military member of the family leaves the services in around 6 months. We could do this by (a) remortgage against owned house and get second mortgage against name of spouse not on owned house deeds, or (b) sell owned house and buy mortgage free.
The questions:
1. If we remortgage to buy second house, does this immediately become the PPR given that the current one is rented?
2. If not, do we have 2 years to sell the currently owned house as the PPR and thus avoid CGT?
3. Would we be best putting both names against the owned house for tax purposes and will this attract any SDLT and/or CGT if we do?

I'll look forward to any help that is out there! Thanks!

by **pawncob** on Sat Nov 05, 2011 9:55 pm

When was owned house acquired? When did you marry?

You have to nominate the PPR once you acquire a second property. Two years to do so.
You'll get letting relief for any period when it wasn't your PPR, so no time limit applies.
Joint ownership is only beneficial if it avoids a tax charge. I don't think it's necessary here.

by **AW489** on Sat Nov 05, 2011 10:03 pm

Thanks for the reply. House was bought in 2003 and we got married in 2009.

by **Peter D** on Sun Nov 06, 2011 10:39 am

Is the owner of the property the serving officer. Were they in the forces when they purchased the property. You may qualify for Job related accommodation and the house you presently own is in fact your PPR until you purchase another home. Regards Peter

by **AW489** on Sun Nov 06, 2011 10:52 am

Peter,
Thanks for the reply: we're happy that the current house is currently our PPR due to the forces link. That is not the real query.
We're unsure about how the status of the property may change if we buy another house and there is an overlap between buying this house and selling the currently owned one. Is the designation of PPR to the new house immediate due to the currently owned one being let, or do we still have the 2 year window? It would seem odd to be allowed the 2 year gap when we'd have a non-PPR (either lived in by us or empty if we're still in service accommodation) whilst the PPR is let to tenants?
Any ideas?

by **AW489** on Tue Nov 08, 2011 11:13 pm

Shameless bump up the "posted queue".
Anyone else got any ideas? Thanks in advance.

by **Incredulum** on Thu Nov 10, 2011 2:43 pm

The legislation is very clear.

s222(8) TCGA

"If at any time during an individual's period of ownership of a dwelling house he
(a) resides in living accommodation which is for him job-related and
(b) intends in due course to occupy the dwelling-house as his only or main residence then
the dwelling house [shall be treated for tax purposes as though] it were at that time occupied by him as a residence."

So the moment you no longer intend in due course to occupy the dwelling-house as your main residence, it ceases to be treated as though it were your main residence.

You should answer Peter D's point on who owns the property as it is relevant whether it is H or W who owns it and whether it is H or W who has the relevant job for the period BEFORE you get married. That said, if it is the wrong spouse, the two year period of absence should be tax free anyawy as it is a period of absence of less than three years - albeit not job related accommodation at that point.

Joint ownership would appear to have been a good idea as - provided you both are treated as living in it at the time the half is transferred - you would entitled to two lots of £40k of letting relief upon sale. However, I would be concerned that you no longer have any intention in due course to occupy that property as a main residence so making a transfer at this stage I do not think I would recommend.

To answer your questions
1. Probably - given the stated intention.
2. You have three years to sell the first property guaranteed tax free, and probably more than that (please provide cost and value today)
3. No CGT on transfers between spouses. SDLT would only apply if the house were mortgaged and the recipient took on liability for the mortgage - unless of course recipient paid spouse for it.

Pawncob mentions making an election. I do not (probably - see point below) agree that an election is necessary - or even possible. You can probably only ever have one property that you intend to occupy in due course.

The "probably" point depends on whether your military accommodation is occupied through a licence or a tenancy. If the latter then you should make an election - and you should make a late election in respect of the first property too.

by **AW489** on Fri Nov 11, 2011 4:44 pm

Thanks for the replies. I'll admit to being a bit bamboozled by all this! Never had to deal with it before and it's not simple!!

More info if it helps:

Current house bought by W in 04 and live in until 07, let since then. Bought for circa 339K, current value circa 530K. No mortgage. W only on deeds.
H & W married in 09. Currently live in MOD accomm; H in forces.
H not linked to any property.