Council Tax - living in two properties - no main r

gwernybwch

Council Tax - living in two properties - no main residence

I own two houses. P house was empty for a short period and I have 'moved in' to the house and informed the Council accordingly. They have written back saying that that there is no record of me informing the Council of House B that I have moved out.
The reason that I hadn't informed the Council of B house is that I haven't moved out as such, that I intend to split my time between both houses.
I've read about main or primary residence, but in my case I plan to split my time 50/50 between the two properties; spending weekends and some days working from home in B house and living mid-weeks in P house.

Any suggestions as to what are the rules and regulations regarding this situation.

For reference - Both properties are in Wales. I am the sole occupant of House P, but I have two lodgers in House B.

silvercar

You need to nominate one as your main residence within 2 years of owning both. Failure to do so in time means you then have to declare the main residence based on fact.

So if you are within 2 years you can choose, considering council tax, CGT etc If after 2 years you can't make the choice yourself. Key questions are which address you have registered as your main residence with your employer, your bank and your doctor.

00ec25

how much tax evasion do you wish to undertake?

house B has 2 lodgers in it - are you claiming the rent a room allowance against that income? yes/no?

if yes then it must remain your main residence or you are committing tax fraud

if no and you are using the "normal method" it does not need to be a main residence for tax law but under housing law you must be resident or they become tenants not lodgers

your council tax will flow from whichever answer you give to the above: P can be main home with 25% SPD or second home (probably liable to 100%?)

with 2 lodgers, house B is already partially liable to CGT anyway

CIS

I can see why the councils would think this was dodgy and it does have the knock on effect for other tax purposes.

In theory there is nothing within council tax legislation itself which specifically requires a person to have a 'sole or main residence' - council tax has both the recognition of 'residence' and 'occupation' as different concepts - however you will have a very hard time trying to prove that one of the properties is not a 'sole or main residence'.

When looking at the aspect of where a council tax 'sole or main residence' could be they will take a test that looks at where you have your belongings, doctor, post etc but they also consider where the 'man off the street' would say to you were resident from the facts. If you declare a property as a main home for tax purposes - council tax case law has used income tax cases when considering sole or main residence - then it's going to be hard to claim it's then not a 'sole or main residence' for council tax purposes as well.

They have written back saying that that there is no record of me informing the Council of House B that I have moved out.
The reason that I hadn't informed the Council of B house is that I haven't moved out as such, that I intend to split my time between both houses.

I would expect the council to stand their ground on this point alone. The properties being in two different areas also opens up the potential for them both to come up with decisions that you are resident - which makes it all the more fun to solve.

Comms69

gwernybwch wrote: »

Council Tax - living in two properties - no main residence

I own two houses. P house was empty for a short period and I have 'moved in' to the house and informed the Council accordingly. They have written back saying that that there is no record of me informing the Council of House B that I have moved out.
The reason that I hadn't informed the Council of B house is that I haven't moved out as such, that I intend to split my time between both houses.
I've read about main or primary residence, but in my case I plan to split my time 50/50 between the two properties; spending weekends and some days working from home in B house and living mid-weeks in P house.

Any suggestions as to what are the rules and regulations regarding this situation.

For reference - Both properties are in Wales. I am the sole occupant of House P, but I have two lodgers in House B.

Two tenants.... clearly trying to prevent a tenancy being created. This will bite you in the backside!

gwernybwch

Comms69 wrote: »

Two tenants.... clearly trying to prevent a tenancy being created. This will bite you in the backside!

You C@ck. Why assume that then go to the effort of posting it? Clearly you have far to much time on your hands.

As it happens, I am a money saver (strange having such a person on this forum). Renting - more than one - room out helps me pay off my mortgage(s) sooner. Is that OK with you?

gwernybwch

Thanks for the replies.

00ec25 wrote: »

house B has 2 lodgers in it - are you claiming the rent a room allowance against that income? yes/no?

if yes then it must remain your main residence or you are committing tax fraud

if no and you are using the "normal method" it does not need to be a main residence for tax law but under housing law you must be resident or they become tenants not lodgers

Yes I have declared my income from my lodgers under the rent a room allowance. It was only when the Council Tax contacted me did I start to look into the main residence thing. Before then I just assumed that I could live in both houses. I see what you mean, if I’m not living there full-time, they can’t be by definition; lodgers. Seems that I haven’t really thought this through :-(

00ec25 wrote: »

your council tax will flow from whichever answer you give to the above: P can be main home with 25% SPD or second home (probably liable to 100%?)

If P was deemed as my main home, I understand that the Council Tax would be 100% at House B (because there is more than one person living there), but would I be automatically entitled to a 25% SPD? I got the impression that a SPD was discretionary?

00ec25 wrote: »

with 2 lodgers, house B is already partially liable to CGT anyway

Can you explain this a bit more? If I deem House P to be my main residence, house B would automatically be liable for CGT. How would having lodgers in a house – whether it be primary or secondary - have an effect on CGT?

CIS wrote: »

In theory there is nothing within council tax legislation itself which specifically requires a person to have a 'sole or main residence' - council tax has both the recognition of 'residence' and 'occupation' as different concepts - however you will have a very hard time trying to prove that one of the properties is not a 'sole or main residence'.

Thanks for that. That is useful to know.

CIS wrote: »

When looking at the aspect of where a council tax 'sole or main residence' could be they will take a test that looks at where you have your belongings, doctor, post etc but they also consider where the 'man off the street' would say to you were resident from the facts. If you declare a property as a main home for tax purposes - council tax case law has used income tax cases when considering sole or main residence - then it's going to be hard to claim it's then not a 'sole or main residence' for council tax purposes as well.

At the moment, I have post, doctors etc still registered with House B. Mostly because I haven’t bothered to really change addresses on anything. All I planned to do was be a good citizen and register to pay council tax for both houses. Seems that it isn’t that simple!

00ec25

gwernybwch wrote: »

Thanks for the replies.
Yes I have declared my income from my lodgers under the rent a room allowance. It was only when the Council Tax contacted me did I start to look into the main residence thing. Before then I just assumed that I could live in both houses. I see what you mean, if I!!!8217;m not living there full-time, they can!!!8217;t be by definition; lodgers. Seems that I haven!!!8217;t really thought this through :-(

no, it is not as simple as "full time", however, it is absolutely vital that it is beyond question your "main" home

I find Portsmouth Council's webpage a useful indication of how they think what that means
https://www.gosport.gov.uk/sections/your-council/council-services/council-tax/sole-or-main-residence/

CIS can fill you in on the tribunal cases if you want more in depth explanations of the issues considered under them

as for RAR.
The first line sets out in stone what you need in order to avoid committing income tax fraud: (my bolding) " Rent-a-room applies to income from providing furnished residential accommodation in the taxpayer's only or main home, on or after 6 April 1992."
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4001

there is no set legal definition of "main residence". As CIS has explained Council tax does not have its own definition, but neither does CGT or income tax. However, there are several important principles which have been established by case law. The key is that each case is judged on its own merits and the overarching principle is property use must show "a sufficient degree of permanence, continuity or expectation of continuity to justify describing that occupation as residence"
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64460

Now whilst CGT law does not directly drive CT, there is obvious overlap of principles. CIS is best placed to provide up to date comments on that

as for CGT.
As soon as you have a second person living there as a lodger you lose your claim to total "exemption" from CGT.
Therefore when you sell , rather than being able to pocket the sales money tax free, you must calculate what you gain was and split that between the period when the property was occupied by you (and up to 1 other lodger) and the period when it was occupied by you and more than 1 lodger.

for the period of more than one lodger you then have to apportion how much of the property is then classed as specifically "let" compared to how much of it is classed as "your residence + any shared areas". There is no proscribed method to use, there are 2 common ones used:
a) number of bedrooms let to lodgers / total number of rooms in the house (your bedroom + lounge, dining room, kitchen etc but always excluding bathrooms)
or
b) floor area instead of (crude) room count

the basis in CGT law for 2 lodgers is here:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64702

as a very crude illustration what that would mean in practice can be shown if we assume 1 resident plus 2 lodgers in 3 bedroom property with lounge, dining room and kitchen so 6 rooms in total

owned for 10 years, of which 4 years had 2 lodgers.
Bought for 100k sold for 250k so gain = £150k

the calculation has a few details you need to know but i'm not going to explain them fully here (read this thread to get the full understanding https://forums.moneysavingexpert.com/discussion/5764759 )

PRR (exempt sole residence) period 150k x (6+1.5)/10 = £112,500k
letting relief: lowest
a) 112,500 x 2/6 = 37,500
b) 150 x 4/10 = 60,000 x 2/6 = 20,000
c) 40,000

net taxable gain due to 2 lodgers: 150,000 - 112,500 - 20,000 = £17,500
a personal allowance (currently £11,300) is also available so in this crude example tax would be payable on 17,500 - 11,300 = 6,200
CGT is payable at 18% or 28% depending on further details, the worst case though is always all at 28% which in this example would mean tax payable of £1,736 against sales proceeds of £250,000 so not exactly the end of the world

However, you are expected to do that calculation when you sell - remember HMRC know you have lodgers cuz you claimed RAR!

00ec25

gwernybwch wrote: »

If P was deemed as my main home, I understand that the Council Tax would be 100% at House B (because there is more than one person living there), but would I be automatically entitled to a 25% SPD? I got the impression that a SPD was discretionary?

SPD is not discretionary

there are 2 factors, meet both and you have an indisputable claim, fail one or both, and you have no claim at all. There is no discretion
- is it your main home?
- do you live there alone ?

as many people find out when renting a pied-a-terre for work purposes, whilst the family remain at home, you can't claim SPD on the pied-a-terre because your main home remains where the family lives, so you end up paying 100% on both properties (unless it is one of the now very few councils who give a discount for a "second" home).

Comms69

gwernybwch wrote: »

You C@ck. Why assume that then go to the effort of posting it? Clearly you have far to much time on your hands.

As it happens, I am a money saver (strange having such a person on this forum). Renting - more than one - room out helps me pay off my mortgage(s) sooner. Is that OK with you?

Not when you’re trying to avoid your responsibilities as a landlord- it’s a shame it’s not a criminal offence frankly.

gwernybwch

Comms69 wrote: »

Not when you’re trying to avoid your responsibilities as a landlord- it’s a shame it’s not a criminal offence frankly.

What landlord responsibilities am I trying to avoid??