Declaring a house as main residence

slopemaster

A question about whether a house counts as my main residence – a bit complicated so please bear with me…

I own a house which I inherited from my mother.
I lived there with her from Dec 2004 until Sept 2009, when I bought my own house and moved out.

I moved back in March 2011 when my mother became ill and then died. So I have been living in the house since then, but still have the other house, which I visit and occasionally stay in.

I have been preparing my mother’s house to let it out and it is now ready but I am still staying there until a tenant is found – which it seems could be a while yet.
I intend to keep the house and let it out – but I was just thinking, if I may sell it in the future then I should declare to the Revenue that I have been living there, to reduce possible future CGT?

Now we got probate in July, but my mother’s house was not registered at the land registry as transferred to me until September. So is this too short a time for it to ‘count’ as my main residence if the house were to be let, say, in Jan/Feb/March so only 6 months or less that I have owned it AND lived there? Or does the fact that I lived there – and was on electoral roll etc – BEFORE I officially owned it get taken into account in deciding whether it was genuinely my main residence? I am still on electoral roll there and have insurance there etc, but have not changed the address on bank accounts etc back again so I get mail at both addresses – does that confuse things? I think I have heard that if you have 2 houses where you spend time, you can choose which is your main residence.

If it is worth doing – ie reasonable chance of being accepted – what do I need to do to tell the Revenue that I want my mother’s house, and not the other one I own, to be treated as my main residence?

Thanks in advance for any advice

slopemaster

pretty please?

jimmo

Not sure how much you already know about Capital Gains, so forgive me if I state the obvious before moving on to the more complex stuff.
1) Ignoring private residence relief for the time being, you almost certainly acquired your mother’s home at the date of her death at its open market value on that date.
That is sometime after March 2011.
Given the present state of the housing market, it seems more likely that you would realise a Capital Gains loss than a gain if you sold it now and nominating it as your main residence now would be pointless.
2) If you do nominate your mother’s house as your main residence for a period that will automatically disqualify you from claiming relief for your own house for the corresponding period.
3) The date of your mother’s death is the first date that you possibly had 2 residences and you have 2 years from that date to make the nomination.
http://www.hmrc.gov.uk/manuals/cgmanual/CG64495.htm
Therefore you still have, maybe a year to make your nomination so don’t make any rash decisions now.
3) Turning now to the question of whether your mother’s house has become your residence you cannot rely on the length of time you have lived there.
See the quotation from Lord Widgery towards the bottom of this link.
http://www.hmrc.gov.uk/manuals/cgmanual/CG64455.htm
In the context of your potential nomination, the fact that you took up residence in your mother’s house whilst she was still alive is circumstantial only and, to put it bluntly, seems to lack any degree of permanence.
Also, the fact that you remain in residence after her death but only until you can let it lacks a degree of permanence.
In my days as a taxman, it was a fairly common theme in the accountancy press that a minimum period to occupy a property and keep the taxman off your back was 6 months. So we taxmen then started looking at all cases involving less than a year but, for me, in your case, the key issue would be the fact that you have retained your house and intend to move back in.
For me, you seem to be walking into a potential minefield unprepared and the taxman may, or may not come looking when you sell your mother’s house or when you sell your own house.
For a simple tax solution, sell your own house within 3 years of moving into your mother’s house and buy a new house when you move out. Otherwise you most certainly take the gamble on which way house prices are going to move in future and be prepared now to pay for quality tax planning advice.

slopemaster

Wow, that's complicated.
Thank you very much for your detailed advice.
I'll need a bit of time to digest the implications, but thanks for making the point that I still have a year to decide what to do, so I shouldn't rush into it now