Buy-to-let becomes 'principal private residence' - what are the rules?

Charlton_King

How long do you have to live in a home before it becomes your 'PPR' as far as CGT is concerned?

Specifically, if you move into a house which you had previously bought and let out for a number of years as an investment property, what do you have to look out for from HMRC with regard to any future sale of it?

00ec25

Charlton_King wrote: »

How long do you have to live in a home before it becomes your 'PPR' as far as CGT is concerned?

Specifically, if you move into a house which you had previously bought and let out for a number of years as an investment property, what do you have to look out for from HMRC with regard to any future sale of it?

unsurprisingly this is subject to many legal cases which have established the following overrriding principle, "main home" is not defined by length of use, it is defined by:

degree of permanence, continuity or expectation of continuity

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64460

you have to live in it as your real main home, not just undertake a 6 month paper exercise. Summed up in the one liner: the test of residence is one of quality rather than quantity

https://www.taxinsider.co.uk/1222-Private_Residence_Relief_Is_It_A_Residence.html

or even, as this one discovered to his cost, 8 months:
http://www.bailii.org/uk/cases/UKFTT/TC/2013/TC02827.html

there is no simple tick list, however, some of the standard issues measured include:
- where do you commute to work from
- where does your partner live
- where do your kids go to school
- where does your correspodence go to
- where do friends expect to find you if calling

glennevis

In 2014 I changed my PPR so I assume it is still the case that you must advise HMRC in writing of the date within two years.
I didn't realise you had to do this until well after I changed PPR but HMRC advised me I could declare the start date up to 2 years after by sending a letter. HMRC then send you a letter to confirm the start date so keep that for future reference when you sell, e.g. to work out CGT.

00ec25

glennevis wrote: »

In 2014 I changed my PPR so I assume it is still the case that you must advise HMRC in writing of the date within 3 years.
I didn't realise you had to do this until well after I changed PPR but HMRC advised me I could declare the start date up to 3 years after by sending a letter. HMRC then send you a letter to confirm the start date so keep that for future reference when you sell, e.g. to work out CGT.

then you either dealt with someone at HMRC who is incompetent or you have not provided the full story or you were very lucky

the time limit is 2 years after first having a particular combination of residences

what that means in English is:
- it is not singularly based on the date you purchased, it can be based on the date you started to use the property as a residence (so it can be after you became its legal owner)
- the clock starts ticking again if you change the use of a residence

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64495

and a nomination is meaningless if the property is not available for use as a residence (you can't nominate and then let it out!)

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64465

glennevis

"the time limit is 2 years"
I do apologise, I have checked my HMRC letter and it is as you say 2 years. I have corrected my post.

Charlton_King

00ec25 wrote: »

then you either dealt with someone at HMRC who is incompetent or you have not provided the full story or you were very lucky

the time limit is 2 years after first having a particular combination of residences

what that means in English is:
- it is not singularly based on the date you purchased, it can be based on the date you started to use the property as a residence (so it can be after you became its legal owner)
- the clock starts ticking again if you change the use of a residence

Either of those three things, eh? In 'English' of course...


It's still unclear to me what actual effect (for CGT purposes) that the sale of a PPR would have after, say, a year as such following, say, ten years as a buy-to-let.

Is the whole of the taxable gain liability nullified? Is it a proportional or 'sliding scale' matter? Are there rules or guidance about such things anywhere?

00ec25

Charlton_King wrote: »

Either of those three things, eh? In 'English' of course...


It's still unclear to me what actual effect (for CGT purposes) that the sale of a PPR would have after, say, a year as such following, say, ten years as a buy-to-let.

Is the whole of the taxable gain liability nullified? Is it a proportional or 'sliding scale' matter? Are there rules or guidance about such things anywhere?

LOL, yes, lots of guides, easily accessible via google, however, here is a 5 step explanation of CGT on a property that was both a home and a letting and lots of links at the bottom of the page to the official info you seem to have missed - I'll avoid saying "once both a" as that may confuse you :rotfl:

https://forums.moneysavingexpert.com/showpost.php?p=73621764&postcount=2

the point of the exercise is to establish a claim to PRR so that you then can claim the final 18 months ownership as exempt (obviously therefore no point living there for more than 18 months) and on that basis you are then also eligible to claim LR

without PRR and LR the only CGT relief you'd get is the personal allowance, hence it is financially very important to establish PRR if at all possible