Help - two houses

[karlatax]

Hello,
I own a house and - 3 years ago come July 8 - I bought another one with my business partner/boyfriend. The second property was intended largely as a place from which to run our small business and I have continued to spend time at my first house on a regular basis throughout the last three years. I also had a lodger at my first house who finally vacated the property in March of this year. Up until about a year ago, I continued to pay the council tax on my first house, as well as my share on the second. Eventually this became too expensive so - for C Tax purposes - I called my lodger a tenant and he has been responsible for the C Tax (paid by benefits) until March of this year when it has reverted to me. Because I was, in fact, still living in part of the house from time to time, I continued to claim relief on my tax return this year for 'rent a room in your house' as - apart from the C Tax angle - I regarded him as a lodger not a full tenant (I always had free access to the house and to all its rooms and facilities throughout his occupancy). He only paid 40 pounds per week rent in any case. Now that he has gone, I am selling the house and the business address will become my only permanent residence. Can you tell me please how I will stand as regards Capital Gains on the first property ? I still receive my personal tax correspondence to my original address, although I do deal with all my business tax affairs (e.g. as Employer in PAYE matters) from the registered address of the business which is my second house. Obviously I am keen not to pay C Gains if this can be avoided as - to all intents and purposes - I have never officially quit my occupation of the first house for any length of time. I have heard that three years may be a relevant period on these matters so I would be grateful for any advice I may need to act quickly upon - as it is the three year anniversary of my ownership / joint ownership of the two places.
Any thoughts would be gratefully received.
Karla

[accountant@uktaxshop]

Karla,

as the first house was your private residence at one time, the last three years will be exempt form any CGT, regardless of whether you lived there or not. This is the "three year" rule you have heard about.

If you need a proffesional to help fill in your tax return for a modest fee, please give me a call.

James Smith
Chartered Accountant
www.uktaxshop.co.uk
01284 764436

[Ian McTernan CTA]

Consideration also needs to be given to electing as to which house was your principal private residence (PPR) and this will have an effect on your claim for 'rent a room' relief for the rental received. If the first house is claimed then as you can only have one PPR the 'business' address would not have qualified for the years in which you are permitted to claim PPR for the first one.

PPR relief and the claim as to which house qualifies is based on a question of fact as you have missed the (two year?) deadline for submitting an election as to which property qualifies. The fact that the tenant paid the council tax would be a major factor in determining this and also whether you have correctly claimed rent a room relief.

You should seek professional advice to sort out the situation as otherwise the Revenue may decide to sort it out for you.

Ian McTernan CTA
McTernan Associates Ltd
ian@imcternan.com