Proof of Principal Residence

balgay

I own two houses. This came about because I decided to move house but bought the second one before I sold the first one. Despite trying for three years I found I could not sell the first one and I have been spending roughly six months a year in each. For health reasons I decided I could not continue with this arrangement and I would have to sell one of the houses. As I cannot sell the first one I decided to sell the second one. I realised that HMRC might not accept the second one is my main residence and therefore not subject to CGT. I never nominated the second one as my main residence because I expected to sell the first. By the time I realised I could not sell the two year window was up.

I recently took advice from a CA who confirmed my situation was ambiguous as I did not meet some of the criteria that HMRC use to identify a principal residence but on balance he felt my efforts to sell the first property (still have proof) would convince HMRC that the second property is my principal residence. Although I was satisfied with that advice the recent publicity surrounding the chancellor makes me want to confirm the situation with HMRC before the sale is complete. 

Because my situation is complex I don’t think I can deal with it over the phone and I cannot see an email contact for HMRC. What is the best way for me to contact HMRC about this? They do have a postal address but my fear is it disappears down a hole. Would an online chat with an agent be a better way or is a letter best? Any advice would be great.

Keep_pedalling

Once you have deducted your annual allowance,  buying and selling costs, do you think your gain will be high enough to give you a CGT liability?

user1977

It's self-assessment, so surely you rely on your CA's advice and deal with HMRC only if they query it?

SiliconChip

My experience of HMRC's online chat is that there are limits to what they're able to do compared to phoning them, and given your issue is complex and pretty niche I doubt if chat will be able to help. If you really feel you need to contact them and you're unwilling to phone then a letter should get answered eventually, but don't expect it to be quick.

balgay

Thanks for your replies. 

Keep_peddaling : Yes, if HMRC don't accept it is my main residence then CGT will have to be paid. It will exceed my annual allowance even with allowable deductions.

User_1997 : I did intend to do just that but the furore about the chancellor has made me think again. I am responsible even after taking CA's advice and if CGT is due I have 60 days from completion to advise HMRC. If I don't they can fine me and charge me interest. I have decided I am going to bite the bullet and get them to give me a decision before I complete. I just can't decide how to do it. There was a day when you went to your local tax office and they were helpfull but ...... 

SiliconChip: Interesting to hear limitation of Chat. I would phone but I hear dire stories of hanging on for an hour and then getting disconnected. I might give it a shot and then write. At least I will have a copy.

glennevis

You can still backdate the date of change of principal residence by up to two years. The chosen date does not have to be within two years of purchase of a second property, it's a sliding window.

In my case I purchased a second property in 2012 and found myself in a similar situation to the OP, 50/50 usage. I didn't know about formal declaration of principle residence at the time (read about it on the forum later). In June 2016 I wrote a letter to HMRC simply declaring the date of it becoming my principal residence as 15th June 2014 and sent it by snail mail; simple statement of fact, no reasoning required. About two weeks later HMRC wrote back to confirm the date, which they stated as 1st July 2014 - two weeks later than I would have liked due to the delay in actioning the declaration. Which was fair enough as I should not have left it to the last minute.

At least if you backdate two years now you will have done your best to minimise the CGT liability on that property.

SiliconChip

balgay said:

Thanks for your replies. 

SiliconChip: Interesting to hear limitation of Chat. I would phone but I hear dire stories of hanging on for an hour and then getting disconnected. I might give it a shot and then write. At least I will have a copy.

The usual advice is to ring first thing in the morning before the queus build up, lines are usually scheduled to open at 8 a.m. but sometimes you can get through if you try a few minutes earlier. I've certainly had less delay doing that than trying to ring during the middle of the day, the longest I had to wait on an early afternoon call was about 40 minutes but I have heard others mention getting the call cut off after waiting for an hour.

mybestattempt

balgay said:

Thanks for your replies. 

Keep_peddaling : Yes, if HMRC don't accept it is my main residence then CGT will have to be paid. It will exceed my annual allowance even with allowable deductions.

User_1997 : I did intend to do just that but the furore about the chancellor has made me think again. I am responsible even after taking CA's advice and if CGT is due I have 60 days from completion to advise HMRC. If I don't they can fine me and charge me interest. I have decided I am going to bite the bullet and get them to give me a decision before I complete. I just can't decide how to do it. There was a day when you went to your local tax office and they were helpfull but ...... 

SiliconChip: Interesting to hear limitation of Chat. I would phone but I hear dire stories of hanging on for an hour and then getting disconnected. I might give it a shot and then write. At least I will have a copy.

HMRC should not/will not give you a binding main residence decision in writing before you have made a return and particularly before a sale completes.

If an advisor you speak to during a telephone conversation gives you what is simply an opinion, you cannot rely upon that if a formal enquiry is made at a later date.

Absent a formal main residence election then which property was the main residence is a matter of fact.

Your accountant appears to have discussed the relevant facts (and the evidence needed to support these) with you and thinks because you tried unsuccessfully to sell the first property that may tip the balance.

I think it's up to you to decide whether to follow considered professional advice or return a capital gain.

user1977

balgay said:

the furore about the chancellor 

Aren't you getting your government minister property-related scandals mixed up?

balgay

mybestattempt said:

Absent a formal main residence election then which property was the main residence is a matter of fact.

Sorry, I don't understand. Can you clarify? 

balgay

user1977 said:

Aren't you getting your government minister property-related scandals mixed up?

No, the chancellor relied on her estate agent as I was going to rely on my CA but she admitted it was her responsibility. I think it is my decision and I should not rely on CA's advice.