Capital Gains Tax and university?

SavvyStudent2021

Hello! 

I'm new to the forum and new to the world of capital gains tax and I'm feeling a bit overwhelmed by it! I'm a homeowner of one property as my parent put their house jointly in my name and their name. I'm in the process of buying a flat and want to transfer my half back to my parent so I don't have to pay an additional 3% stamp duty or be classed as owning multiple homes, I was quite young when the flat was put in my name and didn't realise the repercussions it would have when it came to buying my own place.

The house that I own half of, was purchased in 2013 when I was university. I was at university from 2013 - 2016 and then I rented privately in London for 2016-2021 I lived in the house during reading weeks and summer holidays and essentially treated it as my primary address (however bills and bank statements were obviously at my rented flat in London). I believe there was a time when I was on the electoral register in both places but then I started registering just in London as it was easier for voting. I went back to university in  2018 - 2020 part time, and similarly lived at home during summer holidays and reading weeks. I can't find anything in the capital gains tax manual about studying, only clauses related to working in different parts of the country.

Obviously I have quite a lot of questions (many of which the capital gains tax manual from HMRC has answered) as I have never been through this process before and accountants who have offered to help are quite expensive! But if anyone has any insight i'd much appreciate it, my main questions are:

1.) Does private residence relief get cancelled out by the fact I was renting university accommodation and then private lettings in London?
2.) Is it worth getting an accountant to work out a capital gains tax bill and submit a self-assessment for one transaction? or do people usually do this themselves? 
3.) What documents do HMRC usually ask for to support private residence relief claims?

Thanks in advance to anyone who has insight or has been through the process similarly! 

Jeremy535897

It makes very little sense, taking a longer term view (inheritance tax), to make a gift to your parents, particularly if it may trigger an unnecessary capital gains tax liability. The additional rate of stamp duty may be recoverable if the old property is sold within three years of buying the new one. See: https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

You should nominate the property you own half of as your main residence from the date you acquired your interest. So long as you had no financial interest in any of the rented properties, this can still be done. See section 222(5A) TCGA 1992.

For general guidance, see: https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2021

Some periods of absence may be ignored when calculating the relief, and so long as you occupy the property as your main residence before and after those absences, up to three years of absences may be counted as occupation as a main residence (and the last 9 months of ownership always qualifies for the relief).

SavvyStudent2021

Jeremy535897 said:

It makes very little sense, taking a longer term view (inheritance tax), to make a gift to your parents, particularly if it may trigger an unnecessary capital gains tax liability. The additional rate of stamp duty may be recoverable if the old property is sold within three years of buying the new one. See:

You should nominate the property you own half of as your main residence from the date you acquired your interest. So long as you had no financial interest in any of the rented properties, this can still be done. See section 222(5A) TCGA 1992.


Some periods of absence may be ignored when calculating the relief, and so long as you occupy the property as your main residence before and after those absences, up to three years of absences may be counted as occupation as a main residence (and the last 9 months of ownership always qualifies for the relief).

Thanks Jeremy - this is really useful. So essentially I can still nominate the house I own half of as my main residence for 2013-2021 even though I was renting and living elsewhere during my studies and afterwards? 

My desire to gift the property back to my parent comes from the additional stamp duty costs far outweighing any potential capital gains tax costs (which there will likely be none of if I qualify for PRR). As my stamp duty bill would be an additional 12k if I own a second property.

Jeremy535897

You can nominate it, but that doesn't exempt the whole gain. Originally, you had to nominate which property was your main residence within two years of obtaining an interest in a second property. Unfortunately even rented properties with no value to the tenant triggered this requirement, and many people ended up losing main residence unnecessarily as they missed the time limit. The law was changed in 2020 (confirming existing practice) to stop this problem.

That does not however mean that a property is exempted as your main residence throughout your ownership of it. When you visit a house regularly, you are not absent from it (for example you live in the house during the week and go to a holiday home at the weekend). Where you spend months at a time living away from it, those periods are not covered by the exemption except under the three year rule or other employment (not studying) exemptions. In your case there may be substantial parts of your ownership (more than three years) when you were absent from it, and so you need to look into that.
See: https://www.gov.uk/tax-sell-home/absence-from-home

"If you have one home or you nominated your home

You get relief if you were away from it for:

• any reason for periods adding up to 3 years
• up to 4 years if you had to live away from home in the UK for work
• any period if you were working outside the UK

You must have lived in the home before and afterwards, unless your work prevented you."

If the property you currently jointly own with your parents will be sold within three years of you buying a new property, the additional rate element of the stamp duty on the new property is recoverable.

SavvyStudent2021

Jeremy535897 said:

You can nominate it, but that doesn't exempt the whole gain. Originally, you had to nominate which property was your main residence within two years of obtaining an interest in a second property. Unfortunately even rented properties with no value to the tenant triggered this requirement, and many people ended up losing main residence unnecessarily as they missed the time limit. The law was changed in 2020 (confirming existing practice) to stop this problem.

That does not however mean that a property is exempted as your main residence throughout your ownership of it. When you visit a house regularly, you are not absent from it (for example you live in the house during the week and go to a holiday home at the weekend). Where you spend months at a time living away from it, those periods are not covered by the exemption except under the three year rule or other employment (not studying) exemptions. In your case there may be substantial parts of your ownership (more than three years) when you were absent from it, and so you need to look into that.
See: 

"If you have one home or you nominated your home

You get relief if you were away from it for:

• any reason for periods adding up to 3 years
• up to 4 years if you had to live away from home in the UK for work
• any period if you were working outside the UK

You must have lived in the home before and afterwards, unless your work prevented you."

If the property you currently jointly own with your parents will be sold within three years of you buying a new property, the additional rate element of the stamp duty on the new property is recoverable.

Thanks Jeremy. My parent isn't planning to sell any time soon so the easiest option for me in transfering back. The house is also below the threshold for inheritance tax so I don't have longer term worries there.

My only other question is whether HMRC ask for proof of living at the property and how I go about that, as I have no bills or paperwork relating to my home. I have a list of dates I was at and away from the property and a year where I was registered on the electoral register but that's it. 

 I was considering getting an accountant to submit the CGT claim for me but I imagine it may be easier and cheaper to work out the months I was at the property and months away and then calcuate my private residence relief based on that and self assess online. My only fear is that if I make a mistake or have to provide documents such as bills that I do not have, that I will create a bigger headache for myself! 

Jeremy535897

HMRC are unlikely to ask for proof unless they decide to investigate your tax affairs. In that event, would be easy for them to work out times you couldn't have been there, as you were studying away from there, but otherwise they would have to rely on your calculations. I doubt they would interrogate your friends and relatives and examine your Google timeline!

Remember the three years of absence, so long as you occupy the property as your main residence before and after the periods of absence, and that the last 9 months of ownership are always exempt.

By transferring the house back to your parent, you increase their estate and the potential for more inheritance tax being due when they die.