CGT on property I don't live in.

MarkAndrew_2

Hi,

I bit of a CGT question here which isn't the easiest of scenarios.

I've been reading the CGT rules and primary residence relief amounts etc. on the HMRC website but not sure whether my position was the same as someone who owns two properties or has a buy-to-let property.

My case:
I jointly own (50% with sister) a property that we bought two years ago.
My sister currently lives in this property and we do not rent out any of the rooms
I do not live in this property and I currently live in a rental property with my girlfriend (I am on the tenancy agreement as opposed to living with my girlfriend and helping her with her rent).

Now we're not looking to sell the property anytime soon but I wanted to get to grips with the possible CGT liability I'll have when we do sell.

One of the main things I'm wondering is (assuming I don't go and buy another property while still owning this one) is it possible/legal/accepted by the rules that the property that I own is my main private home?
It states that you can nominate a main residence if you own more than one home that you live in, but seeing as I only own one then is it wrong to assume I can nominate (need to nominate) that as my main home?
I do get some bank statments/mail sent to the property that I own as opposed to the rental but when it comes to the 'facts' I effectively live in the rental - pay council tax, bills etc. (and my sister claims single person council tax reductions and she's the only one there).

My main question is;
Is there a way I can say my owned property is my 'main' home legally, and if so should I nominate now instead of having to determine my main residence by the facts later in time?
As I'm only renting and don't own two properties am I overthinking this?

Thanks for any help

p00hsticks

As I understand it, as you're not actually living in the property day to day, then it can't be classed as your PPR (I believe there are some exceptions to this in some rather obscure cases where you have alternative accomodation provided as part of your job, but it's not going to be releavant here).

As an aside, does your sister pay you rent for living in your share of the house ?

Pennywise

Yes, as above, you have to "live" in the house for it to be your main residence for CGT purposes.

If you don't live there, then you will have to pay CGT when it's sold in the future (if your share of the capital gain is big enough).

HMRC can be quite hot on making you prove that you live there - i.e. there is a case where a guy claimed to be living in a property whilst he renovated it, but HMRC checked the utility bills which turned out far too low for someone who was eating/washing there!

Don't forget that HMRC can check credit reports, electoral registers, etc. They may also have access to records kept by other public bodies.

If your sister is claiming single residency for council tax, then that's evidence in itself that you're not living there.

It's not good enough that "some" of your paperwork is sent there - for you to claim you live there, it has to be virtually all your paperwork, i.e. bank, credit cards, name on utility bills, electoral register, driving licence, etc etc., and your name definitely shouldn't be on any official paperwork re your rented place, i.e. on the tenancy agreement.

pjcox2005

Keep in mind you have £10,600 as an annual exemption, so assuming you sell in a year where you have no other gains from shares etc, and that you and your sister will benefit equally in growth then the property will need to increase by £20k for a gain to arise.

That ignores cost of purchase and disposal of the property as well, for example, legal fees.

If you think the gain will be higher than that then you can consider moving into the property for a short period of time and then you'll get the last 36 months as exempt as well (i.e. the gain times 36 months/total months of ownership).

Listerbelle

When in a similar situation, my accountant (a former Tax Office employee/investigator) advised me that I could nominate a primary residence, and that as I only owned one property (in the UK, at that point in time) this was acceptable wrt CGT. This was circa 2005.

MarkAndrew_2

Thanks for the comments so far,

I've already got the 36months in the bag by living in the property when it was initially bought so thats not a problem.

I agree that if HMRC looked at all the facts then they would most definitely come to the conclusion that I currently live in another property but they themselves advise (loosely) that this is only done if you don't nominate a primary residence - as then the conclusion is you are living somewhere else, either liable for CGT or someone elses property and not making income from your main home.

I have a year left before this nomination deadline happens so I'll speak to HMRC and clarify before doing so/being told doing so counts for nothing.

@Pennywise - I disagree about paperwork. You can have different paperwork sent to different address and it doesn't necessarily determine where you live (second owned homes being the most obvious example). Though it's not the route I'm looking to take anyway, I'm not trying trying to lie to HMRC and claim I live there day to day, I'm more trying to find out if my situation allows me to nominate a primary residence in reflection of the single property asset I own - something I find the written advice blurs a little
.

Cook_County

Even if you are an MP flipping residences for CGT purposes is still legal (although arguably egregious) but the property in question must actually be a residence of yours - not just somewhere you own and only ever spend Xmas day at.

CLAPTON

Listerbelle wrote: »

When in a similar situation, my accountant (a former Tax Office employee/investigator) advised me that I could nominate a primary residence, and that as I only owned one property (in the UK, at that point in time) this was acceptable wrt CGT. This was circa 2005.

from the limited info you have provided your accountant's advice makes no sense
did you act on it?

jimmo

Occupation is a requirement.
http://www.hmrc.gov.uk/manuals/cgmanual/CG64465.htm

John424

It's 'deemed occupation' that counts and not actual occupation. The 3 years you were in at the beginning will count for a lot, the last 3 is automatic. I seem to recall also that the minimum letting exception is £40k anyway so if you have not made £40k profit then you will have no tax to pay unless this rule has been superseded now.

nomunnofun

John424 wrote: »

It's 'deemed occupation' that counts and not actual occupation. The 3 years you were in at the beginning will count for a lot, the last 3 is automatic. I seem to recall also that the minimum letting exception is £40k anyway so if you have not made £40k profit then you will have no tax to pay unless this rule has been superseded now.

But the op has stated that the property is not let.