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Judge clarifies CGT rules for property investors

29 February 2016

CGT RulesHow long do you have to live in a home to qualify for private residence relief is a regular question property investors ask accountants.

The answer just became a little simpler with a new ruling from the First-Tier Tax Tribunal.

The judge decided just a few weeks is enough, providing the owner actually lived in the home.

In the case of Richard James Dutton-Forshaw v HMRC [2015] UKFTT 478, the tribunal upheld an appeal by the owner to allow principle residence relief even though he had only lived in a home for eight weeks.

Despite arguments by HMRC, the tribunal ruled for Dutton-Forshaw as he could prove he had registered for council tax, requested a local parking permit and he had nowhere else to live at the time.

Winning the appeal was worthwhile, as the judge cancelled a capital gains tax assessment from HMRC for nearly £40,000.

The tribunal also cited the case of David Morgan v HMRC [2013] 15 UK FTT 181. Morgan won a similar appeal and had lived in his home for little over a month.

Private residence relief cancels capital gains tax for a home owner for the time they lived in the property as their main home plus 18 months.

If a home owner qualifies for private residence relief, they can also claim lettings relief if the property was rented out. Lettings relief is worth a minimum of £40,000 for each owner.

The courts say the important points to prove when claiming private residence relief are:

You intended to live in the home as your main home regardless of the length of time.

You take some action to move your life there – points that arose during the cases were whether the owner registered for council tax, council parking passes, notified banks, the DVLA and other official bodies of the change of address and that the property was a fit state to live in.

Expats selling a UK home can claim private residence relief up to April 5, 2015 under these rules, but are subject to the 90 midnight rule from April 6, 2015.