CGT query on second home / PRR while also renting. Fairly complicated

DRS1

CG64500 - Private residence relief: only or main residence: two or more residences: late nominations - HMRC internal manual - GOV.UK

If Property C is rented (presumably not on a long lease?) then your step father may not have thought it could be his principal private residence and so Property B would have been his PPR by default.  If so presumably it may not be too late for him to nominate it now?  The page linked above does not say how long you are allowed to make a late nomination (or if you still have to own the property when you nominate it).

silvercar

“ Property B was gifted at no cost to my step brother in Jan 2020.” 

Does your step brother live in it as his home, use it as his holiday home or never visit it? Certainly if stepfather only visits it occasionally, that could be as an opportunity to visit his stepson rather than as a holiday home.

” There is no concept of beneficial ownership of property in Scotland.

Property in Scotland is held in outright ownership which is referred to as 'heritable title'.”

I don’t understand how IHT rules can be implemented by hmrc and apply to Scotland, but that hmrc only considers beneficial ownership for properties in England.

Jeremy535897

Grumpy_chap said:

Jeremy535897 said:

It's not clear, as the phrase "holiday home" is not used. 

Is there a distinction between "holiday home" and "holiday cottage"?

[Deleted User] said:

Property B, holiday cottage in another town, 

If there is a distinction, it would be a very precise legal distinction and I don't think we can assume the OP was writing in that legal framework rather than lay-person's phraseology.  I suggest that the average lay person would draw a vanishingly insignificant distinction between "holiday home" and "holiday cottage".

I didn't register the "holiday cottage" bit, but I don't think it matters. If you live in the property as your home, and your only other property is a rented property, you can claim main residence relief on the holiday cottage in respect of the period you do live there, hence my observation regarding periods of absence.

mybestattempt

silvercar said:

I don’t understand how IHT rules can be implemented by hmrc and apply to Scotland, but that hmrc only considers beneficial ownership for properties in England.

@silvercar

Although this thread is about capital gains tax, rather than IHT, this HMRC guidance, particularly the final paragraph may help your understanding:


https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04441

Jeremy535897

DRS1 said:

CG64500 - Private residence relief: only or main residence: two or more residences: late nominations - HMRC internal manual - GOV.UK

If Property C is rented (presumably not on a long lease?) then your step father may not have thought it could be his principal private residence and so Property B would have been his PPR by default.  If so presumably it may not be too late for him to nominate it now?  The page linked above does not say how long you are allowed to make a late nomination (or if you still have to own the property when you nominate it).

There is no time limit regarding nominations when one of the properties is not owned by the taxpayer, but as the property was sold in 2020, it would only be relevant if HMRC raised a new assessment.

DRS1

Jeremy535897 said:

DRS1 said:

CG64500 - Private residence relief: only or main residence: two or more residences: late nominations - HMRC internal manual - GOV.UK

If Property C is rented (presumably not on a long lease?) then your step father may not have thought it could be his principal private residence and so Property B would have been his PPR by default.  If so presumably it may not be too late for him to nominate it now?  The page linked above does not say how long you are allowed to make a late nomination (or if you still have to own the property when you nominate it).

There is no time limit regarding nominations when one of the properties is not owned by the taxpayer, but as the property was sold in 2020, it would only be relevant if HMRC raised a new assessment.

I thought the OP's concern was that the gain had not been declared yet and that someone was going to have to confess all to the Revenue.  In that case they'd have to work out how much CGT was due and that in turn depends on whether Property B can qualify as PPR for some period of the step father's ownership.  It would obviously be a lot easier if you could ignore Property C on the grounds it was only rented but the page I linked suggests that is not the case.

silvercar

DRS1 said:

Jeremy535897 said:

DRS1 said:

CG64500 - Private residence relief: only or main residence: two or more residences: late nominations - HMRC internal manual - GOV.UK

If Property C is rented (presumably not on a long lease?) then your step father may not have thought it could be his principal private residence and so Property B would have been his PPR by default.  If so presumably it may not be too late for him to nominate it now?  The page linked above does not say how long you are allowed to make a late nomination (or if you still have to own the property when you nominate it).

There is no time limit regarding nominations when one of the properties is not owned by the taxpayer, but as the property was sold in 2020, it would only be relevant if HMRC raised a new assessment.

I thought the OP's concern was that the gain had not been declared yet and that someone was going to have to confess all to the Revenue.  In that case they'd have to work out how much CGT was due and that in turn depends on whether Property B can qualify as PPR for some period of the step father's ownership.  It would obviously be a lot easier if you could ignore Property C on the grounds it was only rented but the page I linked suggests that is not the case.

I read it as slightly more nuanced, that his concern was that his mother would not be at risk of being penalised for any omission in his stepfather’s tax from 2020. But, as I said upthread, I don’t see why anyone would delve in to someone’s tax affairs of 5 years ago.

DRS1

silvercar said:

DRS1 said:

Jeremy535897 said:

DRS1 said:

CG64500 - Private residence relief: only or main residence: two or more residences: late nominations - HMRC internal manual - GOV.UK

If Property C is rented (presumably not on a long lease?) then your step father may not have thought it could be his principal private residence and so Property B would have been his PPR by default.  If so presumably it may not be too late for him to nominate it now?  The page linked above does not say how long you are allowed to make a late nomination (or if you still have to own the property when you nominate it).

There is no time limit regarding nominations when one of the properties is not owned by the taxpayer, but as the property was sold in 2020, it would only be relevant if HMRC raised a new assessment.

I thought the OP's concern was that the gain had not been declared yet and that someone was going to have to confess all to the Revenue.  In that case they'd have to work out how much CGT was due and that in turn depends on whether Property B can qualify as PPR for some period of the step father's ownership.  It would obviously be a lot easier if you could ignore Property C on the grounds it was only rented but the page I linked suggests that is not the case.

I read it as slightly more nuanced, that his concern was that his mother would not be at risk of being penalised for any omission in his stepfather’s tax from 2020. But, as I said upthread, I don’t see why anyone would delve in to someone’s tax affairs of 5 years ago.

Yes you are quite right.

Jeremy535897

DRS1 said:

Jeremy535897 said:

DRS1 said:

CG64500 - Private residence relief: only or main residence: two or more residences: late nominations - HMRC internal manual - GOV.UK

If Property C is rented (presumably not on a long lease?) then your step father may not have thought it could be his principal private residence and so Property B would have been his PPR by default.  If so presumably it may not be too late for him to nominate it now?  The page linked above does not say how long you are allowed to make a late nomination (or if you still have to own the property when you nominate it).

There is no time limit regarding nominations when one of the properties is not owned by the taxpayer, but as the property was sold in 2020, it would only be relevant if HMRC raised a new assessment.

I thought the OP's concern was that the gain had not been declared yet and that someone was going to have to confess all to the Revenue.  In that case they'd have to work out how much CGT was due and that in turn depends on whether Property B can qualify as PPR for some period of the step father's ownership.  It would obviously be a lot easier if you could ignore Property C on the grounds it was only rented but the page I linked suggests that is not the case.

"S222(5A) TCGA92 applies in relation to a notice given on or after 6 April 2020 and replaces an earlier extra-statutory concession (ESC D21). It applies where an individual has failed to make a nomination specifying which of two or more residences is their main residence within the statutory time limit of two years. It allows a late nomination for a period of time, provided that all but one of their residencies during that period had a negligible capital value."

silvercar

Jeremy535897 said:

DRS1 said:

Jeremy535897 said:

DRS1 said:

CG64500 - Private residence relief: only or main residence: two or more residences: late nominations - HMRC internal manual - GOV.UK

If Property C is rented (presumably not on a long lease?) then your step father may not have thought it could be his principal private residence and so Property B would have been his PPR by default.  If so presumably it may not be too late for him to nominate it now?  The page linked above does not say how long you are allowed to make a late nomination (or if you still have to own the property when you nominate it).

There is no time limit regarding nominations when one of the properties is not owned by the taxpayer, but as the property was sold in 2020, it would only be relevant if HMRC raised a new assessment.

I thought the OP's concern was that the gain had not been declared yet and that someone was going to have to confess all to the Revenue.  In that case they'd have to work out how much CGT was due and that in turn depends on whether Property B can qualify as PPR for some period of the step father's ownership.  It would obviously be a lot easier if you could ignore Property C on the grounds it was only rented but the page I linked suggests that is not the case.

"S222(5A) TCGA92 applies in relation to a notice given on or after 6 April 2020 and replaces an earlier extra-statutory concession (ESC D21). It applies where an individual has failed to make a nomination specifying which of two or more residences is their main residence within the statutory time limit of two years. It allows a late nomination for a period of time, provided that all but one of their residencies during that period had a negligible capital value."

So very roughly speaking, it was a second home from the 90s to 2013 and then can be considered as PPR from 2013 until its sale, deemed to be at market value in 2020. All calculations should be in months, but for simplicity let’s say it was bought in 1993, so there is 27 years ownership of which 7 are exempt from CGT as it was the PPR from 2013 to 2020. Calculate the difference in values between market value in 2020 and purchase price, deduct buying and transfer costs and any capital improvements. Deduct 3k CGT allowance if not used elsewhere, then take 20/ 27 ths of the figure you have calculated. That would be the CGT due. 

Maybe stepfather paid it, maybe he didn’t - how would you know? Either way I don’t think it’s a concern of your mother now.