You home and capital gains tax

February 18th 2015

Last year we warned that the Government intended to abolish, with effect from April 2015, a homeowner’s right to elect which of two or more properties he owns (or has the use of) is to be treated as his ‘principal private residence’ and so exempt from capital gains tax.

We are pleased to report that the Government has now withdrawn this proposal. Instead, there is to be a new rule, that a property cannot be treated as the individual’s ‘principal private residence’ for 2015/16 and future years of assessment unless either he is resident for tax purposes in the country in which that property is situated, or, he is present in the property at midnight on at least 90 days in that year. This means, for example, that a United Kingdom resident could not claim that his holiday home in France was his ‘principal private residence’ unless he is dual resident (in both France and the United Kingdom) for tax purposes, or meets the 90 midnights test. It would of course be a good excuse for leaving a boring dinner party: ‘sorry, I must be home by midnight, or today won’t count!’

The more usual case, however, is the individual who owns (or has the use of) two properties in the United Kingdom. Here the right to elect which is to be treated as his ‘principal private residence’ will remain. However, it is vital to remember that the election must be made within two years of acquiring the second property. If you have two or more properties, and have not already discussed your capital gains tax position with us, we strongly recommend that you do so without delay.

Contact DSC Chartered Accountants on Harrogate (01423) 560547