CGT: Principle Residence Relief: Too late to benefit after sale?

937elizabethj

My father has owned his first, de facto main, residence, P1, for nearly 50 years. In 1996 he acquired a second residence, P2, which he used regularly, but I do not believe he ever made a S222(5) CGT Act 1992 election to choose his Principle Private Residence. He is now selling P2 and I would like to obtain relief for the gain arising for the final 36 months by electing that P2 was his PPR for some short period during his ownership.
As I understand it the sale of P2 will not trigger the commencement of a new two year period during which an election could be made. However my father is about to purchase a third property, P3, although I think not until after he has exchanged on P2., so there will be a gap betwwen the disposal of P2 at exchange and P3 becoming a residence.
When P3 becomes a residence I understand an election by father to choose the PPR between P1 and P3 becomes possible, and I would hope then to vary the election to claim P2 as the PPR for some short period in the last two years to obtain the relief.
Is there any reason why this should fail? The fact that P2 will have been sold at the time of the variation should not be a problem; CG64510 shows this. But does the fact that the variation relates to a property which does not need to be considered at the time of the actual election invalidate it? Does the choiceof property chosen for the actual election make a difference; if P1 is chosen as PPR at the time of the election this will have been held concurrently with P2 for a period: P3 would never have been held concurrently with P2.
Advice would be much appreciated!
Elizabeth

Richie(UK)

Hi Elizabeth,

You say that P2 was 'used regularly'. In order to qualify for PPR relief the property will need to have been occupied at some time as the main residence. That is, did it actually become your father's home (even for a short period of time)? Is there any evidence supporting this? (did it become the main mailing address, for example?)

It is worth noting that in the absence of a notification being submitted to HMRC the question of main residence is decided based on the facts available. So, if it can be demonstrated that P2 was actually used as the main residence then it will qualify for relief. Factors that HMRC consider in this area are listed at CG64550.

937elizabethj

Thank you both. Undoubtedly, Richie, the Inspector would deem P1 as the de facto main residence and it has never been let, although P2 has been regularly used as a residence two nights a week. I had hoped you might reply to my thread , Jimmo, and had certainly assumed the position to be as you set out, but could find nothing confirming it in the CGT instructions. I took heart from the Act which states (CGT Act 1992 S222 (5)(a) "which of 2 or more residences is an individual's main residence for any period...notice to the inspector within 2 years from the beginning of that period but subject to a right to vary that notice by a further notice to the inspector as respects ANY PERIOD beginning not earlier than 2 years before the giving of the further notice." (My emphasis)

To construe as you suggest, should not the final reference read "any part of that period"?

To be confident in the effect of an election and variation I agree your final suggestion regarding three concurrent residences would be more comfortable, although I am concerned about the practicle effects of messing about with timings whilst balancing purchasors, vendors and a very easily alarmed father and do't feel confident that it will be possible; do you agree that were I able to effect exchange on P3 before exchange on P2 this would provide the necessary period of overlap, even though P3 would not actually become his residence until a few weeks later, especially if Father were to have work done before he moved in?

Unless I do something to stop it exchange on P2 is imminent, whilst we still have a way to go on P3, so I would appreciate your comments soon!

Many thanks
Elizabeth