Unmarried couple with two properties - CGT & Council Tax queries

CadburyPurple

Bit of a long thread, but I want to ensure I remain compliant with tax laws but do not over-pay unnecessarily:

1. My partner and I - we are not married and will not be getting married - have sold our two flats that we owned before we met.
2. He will stay with his Mum until we purchase a house together, hopefully later this year.
3. I will stay in my second home (Property until this joint purchase. I assume from the day I start living her permanently that I can change from paying 200% council tax (due to second home premium) to paying 75% council tax as I will be the single person living there. Is this correct?
4. We will purchase the house (Property A) as tenants in common with likely split me 70% / him 30%.
5. I will, however, stay living in Property B as my Mum is 82 and needs me around to help her and her partner.
6. My partner will live in Property A as that is closer to his work and to his mother.
7. My understanding is that I continue to pay 75% council tax on Property B and he pays 75% council tax on Property A. Is this correct?
8. For Capital Gains tax, I understand that I can nominate Property A as the "main residence" (irrespective of amount of time spent there) which would be exempt from CGT, should it be sold. Is this correct?
9. My understanding is that the nomination for CGT, which is a choice, is totally separate from Council Tax, which is determined by where you live.

I would appreciate expert views so I can be sure that I don't fall foul of any laws. Any links to determinative sources would be greatly appreciated. I've Googled and AI-searched a lot so I believe my understanding is correct, but I want a 'final' validation, ideally without paying for advice, to ensure I get it right. Thanks in advance.

p00hsticks

I'm not an expert but agree with most of it apart from possibly number 8 - although the criteria may be separate, I think HMRC still have an expectation that you will be living there at least some of the time for it to count as your PPR ('Principal Place of Residence' ) . Where will you be getting your post sent, be registered with a doctor etc ?. 

CadburyPurple

p00hsticks said:

I'm not an expert but agree with most of it apart from possibly number 8 - although the criteria may be separate, I think HMRC still have an expectation that you will be living there at least some of the time for it to count as your PPR ('Principal Place of Residence' ) . Where will you be getting your post sent, be registered with a doctor etc ?. 

All post would be sent to Property B. GP registration would be at Property B. 

silvercar

I think you are fine on most points.

On point 8, you can choose to nominate one of the properties you own as your principal private residence as long as you do so within 2 years of owning the 2 properties. It has to be available to you, so you can't do this if you rent it out. But once you buy property A, you can choose to nominate either as your PPR for CGT purposes. You need to do a calculation as to which one would be more beneficial, as you will only be taxed on part of the gain ie 70% if you only own 70% of it. Which is likely to gain most? When will you sell either one? Also, you are exempt for the time it was your PPR, but not for the time it wasn't - so you may already have some non PPR time to factor in. And the rules could change in the future.

On point 7, I think that if it isn't where you live ie the address registered with your doctor's, work, hmrc etc the local council could well say it is a second home. Though if a property is the main home of one person that evades the 200% holiday home tax.

One extra point, if you own another property and buy a new property, you will be hit with the SDLT on second properties, unless you are selling your main residence and replacing it with another. So buying A and not making it your main home will trigger extra rate SDLT on the whole purchase.

xylophone

You own B, will be living full time at B, will have all post sent to B and will be registered at B as far as medical  and other services are concerned.

How can it be other than your PPR?

CadburyPurple

silvercar said:

I think you are fine on most points.

On point 8, you can choose to nominate one of the properties you own as your principal private residence as long as you do so within 2 years of owning the 2 properties. It has to be available to you, so you can't do this if you rent it out. But once you buy property A, you can choose to nominate either as your PPR for CGT purposes. You need to do a calculation as to which one would be more beneficial, as you will only be taxed on part of the gain ie 70% if you only own 70% of it. Which is likely to gain most? When will you sell either one? Also, you are exempt for the time it was your PPR, but not for the time it wasn't - so you may already have some non PPR time to factor in. And the rules could change in the future.

On point 7, I think that if it isn't where you live ie the address registered with your doctor's, work, hmrc etc the local council could well say it is a second home. Though if a property is the main home of one person that evades the 200% holiday home tax.

One extra point, if you own another property and buy a new property, you will be hit with the SDLT on second properties, unless you are selling your main residence and replacing it with another. So buying A and not making it your main home will trigger extra rate SDLT on the whole purchase.

Thank you very much for your time and comprehensive response.

Neither property will be rented out.

It does seem strange that one can nominate as one's PPR for CGT purposes a property that one owns but doesn't currently live in, but this does appear to be the case from research I've done, and you are confirming this. It is advantageous in my case but I only want to do so if it's definitely allowed.

That is a helpful reminder that I would be taxed on the gain for the %age that I own, e.g. 70%. Property B is very unlikely to increase in value at all: it hasn't in 15 years. The curse of leasehold apartments in this particular location unfortunately. I will not sell this flat while my Mum is alive, which I hope will be 18 years or more as she promises me she will reach 100! I appreciate that Property B will be counted as primary for CGT purposes for the duration I live in it.

My understanding is that I continue to pay 75% council tax on Property B and he pays 75% council tax on Property A. Is this correct?

On point 7:
Property A - I will live there and everything (doctor's, work, HMRC, car insurance, etc.) will be registered there. Thus I understand as the only occupant I will pay 75% council tax.
Property B - My partner will live there and everything of his will be registered there. He will be the only occupant and he will pay 75% council tax.
Do you agree this is correct please? My understanding is that I am disregarded from Property B, as although I own 70% of it I don't live there.

Thank you for thinking of SDLT. I did a separate post on this to keep the topics separate: https://forums.moneysavingexpert.com/discussion/6650024/sdlt-when-you-have-two-homes#latest

CadburyPurple

xylophone said:

You own B, will be living full time at B, will have all post sent to B and will be registered at B as far as medical  and other services are concerned.

How can it be other than your PPR?

I also own 70% of A, which is a larger and higher value property. My understanding is that the default HMRC assumption will be the one you live in, but that this can be overridden by nominating another property that you own, and that one can choose which is counted. EG see article: https://www.bdo.co.uk/en-gb/insights/tax/private-client/private-residence-relief-from-capital-gains-tax. Everything I have read so far suggest that I can choose in order to optimise: this is exactly why I'm asking, to check I get it right.

sheramber

you do need to spend some time residing in property A to claim it as your principal residence. 

S222(5) TCGA92 gives an individual the right to choose which of his or her two or more residences is to be treated as the main residence for private residence relief purposes. It therefore follows that a dwelling-house must be in use as a residence of that individual before it can be validly nominated.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64485

CadburyPurple

sheramber said:

you do need to spend some time residing in property A to claim it as your principal residence. 

S222(5) TCGA92 gives an individual the right to choose which of his or her two or more residences is to be treated as the main residence for private residence relief purposes. It therefore follows that a dwelling-house must be in use as a residence of that individual before it can be validly nominated.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64485

Thank you. It seems like a grey area. For example, if I stay there once a month, would that count as "in use as a residence of mine"? And if I did that, do I then need to be considered for council tax at Property A or would I still be disregarded?

Isthisforreal99

CadburyPurple said:

sheramber said:

you do need to spend some time residing in property A to claim it as your principal residence. 

S222(5) TCGA92 gives an individual the right to choose which of his or her two or more residences is to be treated as the main residence for private residence relief purposes. It therefore follows that a dwelling-house must be in use as a residence of that individual before it can be validly nominated.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg644857

Thank you. It seems like a grey area. For example, if I stay there once a month, would that count as "in use as a residence of mine"? And if I did that, do I then need to be considered for council tax at Property A or would I still be disregarded?

I don't think it is a grey area. If it ever went as far as Tribunal then this is what would be considered "For an individual its ordinary meaning is the dwelling in which that person habitually lives: in other words, his or her home". Habitually is not once a month. That is for CGT purposes which may or may not be relevant for Council Tax purposes.

silvercar

CadburyPurple said:

sheramber said:

you do need to spend some time residing in property A to claim it as your principal residence. 

S222(5) TCGA92 gives an individual the right to choose which of his or her two or more residences is to be treated as the main residence for private residence relief purposes. It therefore follows that a dwelling-house must be in use as a residence of that individual before it can be validly nominated.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64485

Thank you. It seems like a grey area. For example, if I stay there once a month, would that count as "in use as a residence of mine"? And if I did that, do I then need to be considered for council tax at Property A or would I still be disregarded?

From the link posted, "When nominating which residence is to be treated as the main residence, an individual is not obliged to nominate the residence which is factually his or her main residence"