First & second homes and new home

Srthhkb34

We own two homes outright, homes A and B. Historically we have regarded A as our ‘main’ home as it is larger and more valuable than B. Since 2001 when we bought A, we have lived there about 55% of our time. Since buying B in 2005 we have lived there for about 45% of our time. Forced by a cancer diagnosis and ongoing treatment, we now want to sell both of A & B and move to a third property C which we will purchase outright. B has an offer on it and we want to sell B and buy C simultaneously, thus exchanging one ‘second home’ for another ‘second home’. Due to its nature and location, A will take longer to sell. I am anticipating that:
1. On the sale of B and simultaneous purchase of C we will: (a) pay the higher rate of SDLT for purchasing C, the excess of which over the standard rate will be claimable if we can sell A within 3 years. (b) we will pay CGT on the gain on B since purchasing it.
2. On the eventual sale of A we will not pay CGT, because at that time it is our ‘main home.’
3. Once the dust has settled, C will be our sole property and place of residence.

Am I right? I don’t know if it is still of any use but I have a letter dated 2007, from HMRC, which confirms that A is our ‘main home’ for CGT purposes. 

silvercar

Seems correct, though anything can change in the budget. I’m assuming you are married or in civil partnership. If not married you could each have a PPR. On 2, no CGT is due because A has always been your PPR, not because it is your PPR at the time of sale.

I’m not 100% on claiming back the extra SDLT on the purchase of C as you are buying it as your second home, however if you declare it to be your main home - PPR - immediately by changing the declaration that may make the necessary difference. Though then A becomes a second home, which shouldn’t matter greatly as current rules allow the last 9 months of ownership to be exempt along with the time it was your PPR. The calculation will only yield a small percentage of the gain as taxable with a long ownership that could be covered by your CGT allowances.

SDLT_Geek

Srthhkb34 said:

We own two homes outright, homes A and B. Historically we have regarded A as our ‘main’ home as it is larger and more valuable than B. Since 2001 when we bought A, we have lived there about 55% of our time. Since buying B in 2005 we have lived there for about 45% of our time. Forced by a cancer diagnosis and ongoing treatment, we now want to sell both of A & B and move to a third property C which we will purchase outright. B has an offer on it and we want to sell B and buy C simultaneously, thus exchanging one ‘second home’ for another ‘second home’. Due to its nature and location, A will take longer to sell. I am anticipating that:
1. On the sale of B and simultaneous purchase of C we will: (a) pay the higher rate of SDLT for purchasing C, the excess of which over the standard rate will be claimable if we can sell A within 3 years. (b) we will pay CGT on the gain on B since purchasing it.
2. On the eventual sale of A we will not pay CGT, because at that time it is our ‘main home.’
3. Once the dust has settled, C will be our sole property and place of residence.

Am I right? I don’t know if it is still of any use but I have a letter dated 2007, from HMRC, which confirms that A is our ‘main home’ for CGT purposes. 

I agree with most of what you say for SDLT, but there is one nuance.

In order to be able to claim back the higher rate element on Property C, it is important that when you buy it, it is with the intention that it is to be your only or main residence.  It looks as if that is the case, as you say you will move into it. 

For SDLT purposes, it is best not to refer to Property C as your "second property" as this could muddy the waters for SDLT.