Council Tax on Family Home & My Other Flat - Main Residence

00ec25

Sibbers123 wrote: »

If you genuinely spend time at both properties, you can elect what property you want to treat as your main residence - this will only apply from the date the election is made, it is not retrospective.

that may not be possible in this case.
An election must be made within 2 years of first having a combination of residences. OP by his own admission has been using both his flat and his parental home as a residence for more than 2 years and has owned both for at least 3 years

00ec25

Cas85 wrote: »

1) So what does qualify the house as being my main residence? Say my dad dies next week and I immediately want to sell what is the process of the CGT component? What do people in these sorts of situations provide to prove it is their Main Residence?

2) How would CGT be charged? I was away for almost 3 years, do we take 2 valuations and tax on the difference? Presumably work to decorate/put in new roof could be taken into account but not as direct cash figures, more likely just when making the pre-works estimate?

1. 50% of the property is liable to CGT as it has not been your main home between date of acquisition in 2015 to date of sale

assessment of what comprises "proof" of main residence is, as CIS states, the same for both CT and CGT. It is entirely subjective and totally judgemental, you cannot be 100% certain unless HMRC pulls you out for inspection and then checks what you offer them

read this:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64545

2. sold on father's death
market value at date of gift in 2015 = your acquisition cost
Note you cannot have your cake and eat it. Market value of a share of a property owned by someone who is and will continur to live their as their main home will not be 50% of the value of the property. It would be less than 50%, your cost will be lower than you think it should be. This works both ways. there are other scenarios where sub "discount" works to the taxpayers advantage, but not in your case

the gross gain in your case would be
a) sold price less your share 950%) of cost of selling (EA and legal fees excluding any fess associated with the estate administration)
b) less acquisition cost (there are no deductible fess associated with a gift)
c) less your personal allowance (currently 11,700)

the costs you list ("new" roof, decoration) cannot be deducted as they are not capital costs. The asset is the house, you a re repairing a part of the asset (its roof) by bring it back to the standard it was in before, ie a non leaking rook. You are not "improving" the asset by creating something extra which did not exist before.

Cas85 wrote: »

3) From my understanding I have to live in a home for 3 years before it is my main residence... should I let this point comfortably pass before leaving the flat to avoid 3 years of CGT on it?

3. utter rubbish
why people persist in this idea what there is a magic time limit is a mystery. HMRC has successfully won legal cases where people have lived in the property for years but been denied main home status upon it coming up in court because it failed the test of "degree of permanence, continuity or expectation of continuity"
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64460

Cas85 wrote: »

4) With the house would I be liable from 2015 when my share was gifted as I only lived there 1 year as owner but in spite of many previous years as living in it as my parents house? (3 years main residence include when I didn't own?)

4. you are liable from 2015
what you mean by lived in it for 1 year is a lost point since you have already stated the flat was your main residence for the entire period since you became owner of the house

Cas85 wrote: »

5) Finally how far back does CGT go, if I move in for x number of years does that eliminate any old period that would have incurred CGT on sale?

5 CGT applies to the entire period you owned the property
Again why people persist in this urban myth that moving in removes history is a mystery
CGT works on the basis upon selling you are always liable for CGT on the difference between purchase price and selling price.
Part (or all) of that gain may then be covered by a "tax relief" such as private residence relief.
In your case it is historic fact that you owned the property between 2015 and 2018 when it was not your main home, nothing will ever alter that.

Cas85

Thank you both for your responses.


@00ec25/everyone if you could help with some input on the following I would really appreciate it.

1) "market value at date of gift in 2015 = your acquisition cost"

My share in the house cost me £0 so does that mean Capital Gains Tax is charged on the difference between £0 and the current value?


2) "Market value of a share of a property owned by someone who is and will continur to live their as their main home will not be 50% of the value of the property. It would be less than 50%, your cost will be lower than you think it should be"

Can you expand on this a bit please, I am a little confused by the statement/implications.

Note) "what you mean by lived in it for 1 year is a lost point since you have already stated the flat was your main residence for the entire period since you became owner of the house"

I lived in the house for approximately a year before I purchased the Flat. I have lived with the Flat for almost 3 years but my circumstances have changed recently and I am in the process of evaluating where it is best to have as my main residence, leaning more toward the house and as part of this spending more time there and re-declaring where I live to the council.

4) What if I rent the flat out, will that mean that the house becomes my main residence again as long as I am living there?

5) if I buy or start renting another property do I have 2 years to nominate the house as my main property (again alongside me living there).

6) What if I spent more time at my Girlfriend's flat (where I already contribute toward her bills) as my main residence, would that give me 2 years to choose which was my main residence? Notably this is closer to my work (50 mins vs 35 mins).

7) When my father dies, if the house is not my main residence will I be charged CGT when his share is transferred to me or just IHT?

8) I have been to see an IFA (definitely Independent) that was recommended to the family a few years ago and what they told me was totally wrong (E.g. clearly stating no IHT on the £1M house as we were joint tenants) so I am concerned about who is going to give my family proper advice. It seems that really I should be talking to a Tax Accountant but can some one give me a little guidance on the specific type/profile I need to look for?

The fact is I genuinely live between multiple places and while I was focused on this flat, that is not the case anymore (in massive part due to my Girlfriend more than anything else) and it certainly doesn't seem to be tax efficient to sit without making my position clear. I am not looking to defraud the system, I just don't want to not get unnecessarily taxed by it because I haven't planned and declared things properly. Additionally I want to know now what hurdles I have to deal with and how best to accurately express my position with the Tax man when my father dies, instead of get my head around things while mourning.

Thanks for taking the time to provide your input guys, I really appreciate it.

00ec25

Cas85 wrote: »

Thank you both for your responses.


@00ec25/everyone if you could help with some input on the following I would really appreciate it.

1) "market value at date of gift in 2015 = your acquisition cost"

My share in the house cost me £0 so does that mean Capital Gains Tax is charged on the difference between £0 and the current value?
CGT rule: connected person. (google it)
your acquisition cost is as i said, market value of the property at 2015 so a house now worth £1m, 3 years ago was worth ? 800K? less an adjustment for you being part owner of a property lived in by someone else
for the sums involved go pay a professional for help. Your need a RICS valuer who is aware of the full circumstances of your and father's ownership to value it at 2015 for you.


2) "Market value of a share of a property owned by someone who is and will continur to live their as their main home will not be 50% of the value of the property. It would be less than 50%, your cost will be lower than you think it should be"

Can you expand on this a bit please, I am a little confused by the statement/implications.
house worth £1m now you own 50%, so 500k
fine if you sell the house, you get 500k

BUT would you buy half a house for 500k and moreover a house lived in by someone else who has full run of the place and has no intention of leaving.
You might, but you sure as hell won't pay £1m x 50%
you'll offer and pay (a lot) less to reflect the fact you are not buying a house that is easily sold or easily used because someone else has a say in it, even if he is your father - that is why you need a professional valuer to make the adjustment downwards for what half a share of a property is worth in such circumstances

Note) "what you mean by lived in it for 1 year is a lost point since you have already stated the flat was your main residence for the entire period since you became owner of the house"

I lived in the house for approximately a year before I purchased the Flat. I have lived with the Flat for almost 3 years but my circumstances have changed recently and I am in the process of evaluating where it is best to have as my main residence, leaning more toward the house and as part of this spending more time there and re-declaring where I live to the council.

please provide complete dated timeline for each property, not "abouts"

4) What if I rent the flat out, will that mean that the house becomes my main residence again as long as I am living there?

physical occupation of a property is an absolute requirement for it to be a main residence
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64465
a let property by definition is not your home, it is the home of your tenant

5) if I buy or start renting another property do I have 2 years to nominate the house as my main property (again alongside me living there).
yes you do, the clock restarts as soon as you have a new combination of residences. Note the word is residence, you have to be able to live in either property, as above, let one and it ceases to be a residence

6) What if I spent more time at my Girlfriend's flat (where I already contribute toward her bills) as my main residence, would that give me 2 years to choose which was my main residence? Notably this is closer to my work (50 mins vs 35 mins).

frankly if i was your tax inspector i would come at it from the start point that your main residence is your GF's anyway. I 'd then ask you to disprove that by showing how you use either of the other two properties. It is a perfectly reasonable expectation that a couple live together in a joint home, not in separate properties. In simple terms my stance would be: your claim the flat is your home is an attempt at tax fraud and would require you to prove otherwise.

7) When my father dies, if the house is not my main residence will I be charged CGT when his share is transferred to me or just IHT?

this is such a basic question. You are talking about a property worth £1M

if you have not mastered these basics by your own reading then please pay a professional to advise you

8) I have been to see an IFA (definitely Independent) that was recommended to the family a few years ago and what they told me was totally wrong (E.g. clearly stating no IHT on the £1M house as we were joint tenants) so I am concerned about who is going to give my family proper advice. It seems that really I should be talking to a Tax Accountant but can some one give me a little guidance on the specific type/profile I need to look for?

The fact is I genuinely live between multiple places and while I was focused on this flat, that is not the case anymore (in massive part due to my Girlfriend more than anything else) and it certainly doesn't seem to be tax efficient to sit without making my position clear. I am not looking to defraud the system, I just don't want to not get unnecessarily taxed by it because I haven't planned and declared things properly. Additionally I want to know now what hurdles I have to deal with and how best to accurately express my position with the Tax man when my father dies, instead of get my head around things while mourning.

Thanks for taking the time to provide your input guys, I really appreciate it.

an IFA certainly knows some tax, but may not be in inheritance tax specialist

for the sums involved you need to find and pay a STEP member
https://www.step.org/for-the-public

note, if you look for an accountant/tax adviser remember many do not deal with inheritance tax. They may well deal with CGT, but both together is a narrow field for most high street accountancy practices. You'd need to find a decent sized firm who employ specialist accountants

xylophone

https://adviserbook.co.uk/

When the menu comes up on the left tick confirmed independent

and the other specialisms you require.