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Where Taxpayers and Advisers Meet

Overlap while selling/buying houses - nominate primary residence

TG-W2
Posts:6
Joined:Wed Mar 17, 2021 12:16 pm
Overlap while selling/buying houses - nominate primary residence

Postby TG-W2 » Mon Jun 28, 2021 4:17 pm

As we move house, there is an overlap where we will temporarily own both houses; in order to avoid CGT I understand we need to inform HMRC which is our primary residence?

We've owned our current property for 25.5 years.
We are in the process of moving to Scotland and will complete/settle the purchase in mid-July.
Our current property is up for sale and we will continue to live in it until it sells.
However, we will be spending approximately 10 days a month in the new property.

My understanding is that we need to inform HMRC that we nominate our current home as our Primary Residence to avoid any CGT when it sells.

Is this correct please?

someone
Posts:689
Joined:Mon Feb 13, 2017 10:09 am

Re: Overlap while selling/buying houses - nominate primary residence

Postby someone » Tue Jun 29, 2021 1:41 pm

Yes, you will need to inform HMRC, but your planned ownership might also cause you problems if you intend to reclaim the second home SDLT when you sell.

The experts here will hopefully confirm my understanding but I think to count a a main home replacement you have to intend to occupy it as your main home ASAP after purchase. Your current scheme seems to be that it will be a second home until you sell.

On the CGT, if you expect to sell within nine months of buying your new home then you should nominate that one as your PPR as you automatically get the last 9 months - otherwise when you eventually come to sell your new home you won't get PPR for the initial period of ownership.

You have two years to backdate a PPR nomination so (unless it takes more than 2 years to sell) if you want to avoid any CGT on this transaction but maximise PPR, you should wait to make the PPR election once you have a date for exchange and back dated to 9 months before the exchange date on the sale (assuming it's more than 9 months from purchase of your new home)

someone
Posts:689
Joined:Mon Feb 13, 2017 10:09 am

Re: Overlap while selling/buying houses - nominate primary residence

Postby someone » Tue Jun 29, 2021 2:37 pm

Oh, and one thing to be clear about, there are two different "primary residence" tests. One is the SDLT one which is "on the facts", and the other is the CGT one which, if you've made an election, is determined by the election you have made (if no election is made within two years of the residences changing then it's also "on the facts"

The CGT election does not alter the SDLT primary residence determination.

TG-W2
Posts:6
Joined:Wed Mar 17, 2021 12:16 pm

Re: Overlap while selling/buying houses - nominate primary residence

Postby TG-W2 » Wed Jun 30, 2021 10:00 am

Yes, you will need to inform HMRC, but your planned ownership might also cause you problems if you intend to reclaim the second home SDLT when you sell.

The experts here will hopefully confirm my understanding but I think to count as a main home replacement you have to intend to occupy it as your main home ASAP after purchase. Your current scheme seems to be that it will be a second home until you sell.
Thank you.
looking at this example, it seems to be almost the same as our situation and indicates that the Additional Dwelling Supplement (ADS) will be reimbursed upon the sale of the initial property ; or am I missing something?

https://revenue.scot/taxes/land-buildings-transaction-tax/lbtt-legislation-guidance/worked-examples-additional-dwelling-supplement/examples-amendments-returnsrepayment-claims-ads/reclaiming-ads-paid-previous-main-residence-sold

someone
Posts:689
Joined:Mon Feb 13, 2017 10:09 am

Re: Overlap while selling/buying houses - nominate primary residence

Postby someone » Wed Jun 30, 2021 1:20 pm

The problem (and it might not be a problem but it's the way I thought it worked) is that to qualify for the main residence replacement relief you have to occupy your replacement home as your main home ASAP after purchase.

So someone selling their main home but moving into a existing second home as their main home and buying a replacement second home doesn't qualify for the relief.

Likewise, someone buying a second home and treating it as a second home doesn't qualify for the refund on selling their main home if they only move in once they've sold their second home.

In your example the unsaid assumption is that Andrew and Patricia make their new home their main home immediately (although I don't think anyone will care if it's only two months - but if it's a year between purchase of second home and sale of first then it's possible that someone will take notice.

pencilpot
Posts:11
Joined:Tue Dec 22, 2015 12:34 pm

Re: Overlap while selling/buying houses - nominate primary residence

Postby pencilpot » Mon Aug 08, 2022 5:42 pm

Sorry to open an old tread but what would be the stance in the following scenario

Original home purchased in 2008 Property A and lived in there since.
Husband and wife bought property B in 2017 with a view to building a new home on the land
Property B was rented wile plans were agreed etc. Property B remained rented
Property C was built in October 2020 on part of the land of property B (started 2 years previous COVID-19 etc adding to the delays)
In November 2020 Property C was moved into as a PPR until Jan 2022. Property A that was the previous Home was updated for sale
Property B remained rented always.
In Jan 2022 Property A was moved back into for family reasons and more local support.
Property C will most likely now be sold, as will Property B at some point.

The question is will property C be entitled to PPR for the 14 months it was occupied and if sold not be subject to CGT at all?

In terms of intention to live there and indeed genuine occupation there is no issue there.
I’m just not sure of the potential liability/ PPR Exception

Any advice if greatly received.


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