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Capital Gains Tax (CGT) rules state that any gain made on the disposal of a property is exempt from tax if the property is (or has been at any time during the period of ownership) the owners ‘only ormain residence’ (deemed ‘Principal Private Residence’  - PPR). The property need not be the actual main residence at the date of sale but if it has been for part of the period of ownership then the current rules allow for the last eighteen months ownership to be exempt as well as the period of actual residence. As from 6 April 2020 this eighteen months will be reduced to nine months. 

Owners of second homes or buy to let properties can take advantage of this PPR exemption rule by the means of an election permitting the owner to nominate which residence is to be treated as the PPR. Once that election is in place then the last eighteen months of ownership is tax- free. The nominated property can be situated in the UK or abroad.  

The value of making this election is that having made it initially, it can then be varied (‘flipped’) as many times as required by submitting a further notice to HMRC. There is no prescribed form or wording for the election but the rules state that it must be made within two- years of acquiring a second (or subsequent residence) unless there is a delay in occupation, in which case the date of moving into the residence is the trigger event.  

Good tax planning is to make the election as soon as a second property is purchased. Obviously if there is more than one property to sell the election needs to be on the property that stands to make the most gain.  

If no election is made, then HMRC will make its own determination on sale. There are no set rules or conditions to assist HMRC in making the decision, however time spent in a property is apparently not the sole deciding factor, the test being ‘one of quality rather than quantity’.  

Practically the sale of a property takes at least two to three months but many sellers would have made the decision to sell some weeks before. To take advantage of this tax planning, once the decision has been made to sell then the election shouldbe made in favour of the property to be sold; then when the sale is completed 'flip' back to the main home. Themain home will lose PPR relief for the period that it takes to actually sell the second property but this is likely to be insignificant in a long period of ownership.