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Where Taxpayers and Advisers Meet

Main Residence Query

josswallace
Posts:34
Joined:Wed Aug 06, 2008 3:33 pm
Re: Main Residence Query

Postby josswallace » Tue Dec 01, 2020 8:21 pm

I would really like to understand a bit more about this whole area. Can any one vcomment on the scenario below.

If we take the case of a person who owns a flat in London and then decides to buy a second property in the country, my understanding is that the individual can choose which property to nominate as his main residence.

In some circumstances the person may want to keep the flat as work/social access to London etc. but in fact the new house would be "where he lived", alternatively the new house in the country could be used as an occasional weekend/holiday home.

Am I right in assuming that having purchased the second property, registered for council tax etc. it is the individual’s right to notify HMRC which of the two properties he wants to register as his "main residence for CGT purposes" and that decision can be based on what suits the individual for CGT purposes rather than the use the residence is put to.

Specifically can HMRC at the time of declaration of nomination of main residence refuse to accept the nomination and if so on what grounds. Also can HMRC at some future date, say, 18 months later, query this election and require proof of what type of occupation the residence used for.

bd6759
Posts:3459
Joined:Sat Feb 01, 2014 3:26 pm

Re: Main Residence Query

Postby bd6759 » Tue Dec 01, 2020 8:44 pm

Everything you say is correct.

A person lives in a house in London which is, as a fact, his residence.

He buys a country retreat which he uses at weekends, and perhaps a bit longer in the summer.

Both houses are residences. London is his main residence, but he could have nominated the country one as his main residence if that suited him better. The nomination determines the question of which is the main residence.

If he sold the country house for a quick profit, it would not have been a residence and the nomination would be ineffective. It is a question of fact and degree as whether it waa a residence or not.

josswallace
Posts:34
Joined:Wed Aug 06, 2008 3:33 pm

Re: Main Residence Query

Postby josswallace » Tue Dec 01, 2020 10:00 pm

I would really appreciate feedback on the query below.

If we take the case of a person who owns a flat in London and then decides to buy a second property in the country, my understanding is that the individual can choose which property to nominate as his main residence.

In some circumstances the person may want to keep the flat as work/social access to London etc. but in fact the new house would be "where he lived", alternatively the new house in the country could be used as an occasional weekend/holiday home.

Am I right in assuming that having purchased the second property, registered for council tax etc. it is the individual’s right to notify HMRC which of the two properties he wants to register as his "main residence for CGT purposes" and that decision can be based on what suits the individual for CGT purposes rather than the use the residence is put to.

Specifically can HMRC at the time of declaration of nomination of main residence refuse to accept the nomination and if so on what grounds. Also can HMRC at some future date, say, 18 months later, query this election and require proof of what type of occupation the residence used for.

Does the main residence have to be kept for a minimum term and if so what is that term.

josswallace
Posts:34
Joined:Wed Aug 06, 2008 3:33 pm

Re: Main Residence Query

Postby josswallace » Wed Dec 02, 2020 2:11 am

Re selling for a quick profit.....what constitutes quick. Is there a fixed time span after which one can sell with no CGT issues

bd6759
Posts:3459
Joined:Sat Feb 01, 2014 3:26 pm

Re: Main Residence Query

Postby bd6759 » Wed Dec 02, 2020 10:09 am

No. It is a question of fact and degree whether a dwelling is a residence.

If there are two or more residences, you can choose which is to be regarded as the main one. HMRC can only challenge this on the grounds that a dwelling was not a residence. The first simple test is the length of time you indend to keep it. If you have a plan to sell it, then it might not be a residence.

If you don’t choose, HMRC will determine which is the main one.


Go to www.bailout.org. Search for Goodwin Curtis. That will return a plethora of hits where the tax tribunals have considered the court of appeal ruling in Goodwin v Curtis. That is the test the tribunals will follow.

josswallace
Posts:34
Joined:Wed Aug 06, 2008 3:33 pm

Re: Main Residence Query

Postby josswallace » Wed Dec 02, 2020 1:04 pm

bd6759

Could I just say many thanks for your help and guidance.

My exact situation is that when we sold our permanent home in London I attepted to nominate our flat which had been let under AST's as our main residence even though we only intended to use it as weekend/occasional residence as we intended to rent a property for a year before deciding whether to move in and use the flat as our permanrnt home. When I discussed with HMRC what the process was for nominating our flat as our main residence as the form asks which of the two owned residencies was to be nominated, I understood that as we only owned one property it was not necessary.

It is not clear at the moment what HMRC's position is other than they dont accept our claim that the flat was our main residence, and I am in the process of gathering the facts prior to a Tribunal and ADR process. Clearly they could argue that the flat was not our main residence because it had not been nominated appropriately or they could argue that it was never a residence. Can I reasonably ask that HMRC clarify exactly what their position is.

If its important the lease of the flat we rented had a get out clause for both parties after 6 months which was exercised by the landlord and so we spent part of the time in the rented accomodation under lease terms, two months under notice and the remaining two or so months on an informal arrangement with the landlord as it suited both of us.

I would say that the HMRC investigating officer has informed me that they would advise their management that they would not be looking for penalties which I take as acceptance that we are not hiding anything but only trying to minimise our CGT exposure under HMRC current rules.

etf
Posts:710
Joined:Mon Nov 02, 2009 5:25 pm

Re: Main Residence Query

Postby etf » Wed Dec 02, 2020 3:58 pm

Is there a fixed time span after which one can sell with no CGT issues
Just throwing this in as an aside:

Whilst drawn from a different context, (that of the availability of mortgage interest relief, now repealed, in cases of temporary absences from the mortgaged property), it may be worth noting that the old Inland Revenue Extra Statutory Concession A27 suggested that a period of occupation of not less than 3 months was required to establish a property as the only or main residence.

It is not meant to be a direct answer to your question, just an interesting fact.

bd6759
Posts:3459
Joined:Sat Feb 01, 2014 3:26 pm

Re: Main Residence Query

Postby bd6759 » Wed Dec 02, 2020 8:02 pm

Is there a fixed time span after which one can sell with no CGT issues
Just throwing this in as an aside:

Whilst drawn from a different context, (that of the availability of mortgage interest relief, now repealed, in cases of temporary absences from the mortgaged property), it may be worth noting that the old Inland Revenue Extra Statutory Concession A27 suggested that a period of occupation of not less than 3 months was required to establish a property as the only or main residence.

It is not meant to be a direct answer to your question, just an interesting fact.
That is not correct. The concession, or the part to which you refer, was in connection with an allowable period of absence. If there was to be a deemed occupation, then physical occupation of three months prior to the allowable absence would be sufficient to trigger the deemed occupation. The property would be owned, with deemed occupation, for a much longer period.

It had no bearing on determining residence in the real sense.

bd6759
Posts:3459
Joined:Sat Feb 01, 2014 3:26 pm

Re: Main Residence Query

Postby bd6759 » Wed Dec 02, 2020 8:28 pm

Can I reasonably ask that HMRC clarify exactly what their position is.
That would be eminently sensible. You can't really ask for help without knowing what the problem actually is.

The Officer will be following this guidance:

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64420p
I would say that the HMRC investigating officer has informed me that they would advise their management that they would not be looking for penalties which I take as acceptance that we are not hiding anything but only trying to minimise our CGT exposure under HMRC current rules.
That's quite generous of him/her. He/She might find that their manager disagrees, so he/she ought not to have said anything without authority. Clearly you haven't taken proper advice prior to the event and have not declared a gain that may be taxable. That could quite easily be construed as careless.

etf
Posts:710
Joined:Mon Nov 02, 2009 5:25 pm

Re: Main Residence Query

Postby etf » Thu Dec 03, 2020 10:50 am

That is not correct
My information was lifted from an old edition of Tolley's Tax Planning ..the chapter on Private Residences.

I've always thought it interesting that HMRC were able to define a period for people to requalify for MIRAS on their only or main residence, but CGT PRR remains a case of fact and degree. Would tax law be better if it could take out some of the grey areas? I know the argument against is that people would do the bare minimum to qualify and then sell, but perhaps that could be remedied by setting a higher bar in the first place.


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