Newsletter issue - June 2022
The sale of every property is potentially taxable under the Capital Gains Tax (CGT) rules. When an individual sells their only or main residence, generally the gain is exempt from CGT due to the Principal Private Residence (PPR) relief. However, we are so used to saying this that we are in danger of forgetting the two conditions that must be satisfied for a claim to succeed.
The property must:
Queries are most likely to arise in situations where a property has been bought and sold within a relatively short period; here HMRC will be looking at whether the taxpayer is, in reality, trading. If HMRC are not satisfied that the relief is due they will look at whether the owner had any intention of living in the property permanently and require proof that the property has been lived in as the PPR.
Recently HMRC have been targeting self-build builders, questioning as to whether the property has been built intending to be the main residence. If a self builder repeats the process of building, moving in, selling and rolling equity gains into subsequent houses, HMRC may take the view that the self builder has become a business and seek to tax the gains as income rather than as exempt under the CGT rules. Such a situation is more likely if the person has no other income or works in the building trade.
HMRC will require proof that the property has been lived in as the PPR. However, there is no set rule as to the number of days of residency and there will be some circumstances where the 'intention' has been to live 'permanently' but was not possible for some reason.
Should HMRC query a PPR claim the following may help in your appeal:
A final suggestion is for the owner to introduce themselves to neighbours to let people know who lives there.
As a valued member of our community, we appreciate the trust you place in us to make sure all your critical services continue.
We are committed to an evidence-led and common-sense approach to containing the coronavirus outbreak and mitigating its impact on employees, customers and our wider business operations.
Please be assured we are preparing for our services to continue as normal. We have business continuity plans in place to minimise the risk of infection and make sure we can continue to deliver a business-as-usual service to our customers should an infection occur at an office. These include implementing clear guidelines for employees, providing support and advice for anyone who needs to self-quarantine, and issuing guidance on following safe hygiene practices across the organisation.
You can find further information on Covid-19 below to keep you updated: