Capital gains

slop

I have 2 properties property A and property B.

Property A is currently my primary residence
Property B is currently rented

I am currently looking to move house, leaving propery A, however i want to keep it for sentimental reasons.

I have descided to move my good tenants into property A and sell property B.

The sale from property B will be used to buy a new home.

My question is, how long do i need to live in property B, before it is classed as my primary residence? Is this method allowable?

Murdina

It is a test of quality not quantity and not laid down in law anywhere. Broadly though I would say if you leave house A and move all your stuff to house B and tell everyone council tax banks etc you now live at B should be no problem in theory from day one but certainly I would have thought after 3 or 4 months. If you have 2 residences you live in then you have 2 years from acquiring the second one to elect which is your Principal private residence so if there is some overlap you might think about this aspect. I would probably not market property B until you have fairly clearly taken up residence there. Do be aware that there are some bits of tax law which can tax property sales as income not gains with no relief for living there and I understand that HMRC are starting to scrutinise buy to let market no doubt with points like this in their mind.

slop

thank you so much for your insight.

missmoon

Note that the gain of Property B will only be exempt under Principle Private Residence (PPR) on a time apportioned basis. However, if you live in it, the previous 3 years will count as deemed occupation. The gain on the rest of the period of ownership will be chargeable.

The PPR on property A, will cease when you move into property B, so if you were to sell property A in the future, the gain will be time apportioned again and the gain on it when not PPR will become chargeable.

However, there is a letting relief also available, if you lived in the property, begin the lesser of:
*the balance of the gain chargeable
*the gain attributable to the letting period
*and £40,000

slop

Thanks Jim,

Would an accountant or a lawyer be the best help here? My current accountant is very vauge when i ask him questions.

Regards

Paul

Murdina

Jimmo if someone moves into a house lock stock and barrel for 3 months taking the kids the pets telling everyone they know inc HMRC and the council tax I think any tax man (and I was one once too) would be hard pushed to argue they did not occupy as PPR. If they bought the house moved in for 3 months and sold then there are arguments they bought with a view to resale, or as a trade, BUT if you already have owned the house for some years for other reasons then that is a much more tricky line to run. Incidentally in all my time since leaving HMRC I have yet to see any challenge to PPR from an inspector and rarely meet anyone else who has either - ditto business asset taper relief. Just wish they would give CGT the attention that small businesses get - there must be a lot more money in it.

ginger_nuts

I was advised by an accountant to live in my BTL for a year before I sell .I intend to do that .

Murdina

Jimmo it's good to hear HMRC are tackling this area not least because I often wondered when in practice why bother spending time and money getting CGT right (other than for obvious ethical reasons) when the only enquiries I ever saw were on valuations (and I have posted and trawled on other websites and come up with same conclusions from other tax advisers - so I was not just lucky). Obviously longer is spent there the better. But it is a qualitative test - after all plenty of people live in one house in the week and another at weekends and the law recognises this and allows you to opt for which is PPR. These cases rarely go to court but I think you could win on a very short period of residence if the facts were right and well presented. I have also read the articles you refer to by the way.

slop

If slop owns a pair of semis and moves next door for 3 months would that stand scrutiny?

thats basicaly the sittuation, in order to minimise the tax burden i'm going to focus on pulling together all the improvement costs etc and utilising my wifes alloances too. thanks again for all the help.