An interesting case has come up recently, the results of which bring some clarity to HMRC’s position on private residences. The case in question involved a couple who inherited a second home from a deceased parent.
They complied with the usual filing deadlines and sent an election to have the second property considered as their principal private residence for the week before it was sold on 19 October 2007. If successful, the election would have had significant Capital Gains Tax consequences. For example; if a property is at any time considered to be a principal private residence, the last three years of ownership will be ignored for CGT purposes.
HMRC rejected their claim.
The election was refused, not because they only claimed to be in residence for a week, but because they could not demonstrate that they had occupied the second property with any degree of permanence or continuity.
- The owners kept no records of their periods of residence in the inherited house.
- None of the householder bills were in their personal names.
- No personal possessions were moved to the second property.
- The inherited house was similar to, and only 6 miles from, the main residence.
- Steps were taken to sell the property shortly after it was inherited.
Readers who may be considering this type of arrangement should take note: it is not only essential to make a proper election to HMRC within the required time limits, it is also critical to accumulate evidence of appropriate occupation of the elected property..