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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15846
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I bought my home in 1983. For 10 years it was the only house

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I bought my home in 1983. For 10 years it was the only house I owned though I lived in rented accommodation elsewhere during the week. In 1993 I bought another house & lived in it (& nominated it is my main residence). In 1996 I sold this main residence & bought a house with my husband. This was the our main residence & around the same time I made my husband the joint owner of the original house, which since 1993 was my the our second home. Throughout this time the house was never let & was used only by us and our friends and family. In 2010 we sold our primary residence and moved into the original house which is now our only home.

We will no doubt sell this house and move again at some point in the future. How will I calculate what Our CGT liability is?

Hi.

When you bought the house with your husband did you make a main residence election for that house to be treated as your main home as a married couple who are living together can only have one designated main home between them?

Customer: replied 3 years ago.
No. I had already said to HMRC l that my London House was my main residence & the original house wasn't . So when I sold the London house it was my main residence. And when we sold the house we bought together we didn't pay CGT on it as it was our main residence. But we didn't say anything explicit to the tax people.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 3 years ago.
Ok
Hi again.

You might refer to the HMRC helpsheet HS283 as part of this answer.

The gain on the sale of a property is treated as having accrued evenly over the entire period of ownership so all you need to do is divide the gain by the number of months that you owned it and then deduct the tax free parts to arrive at the taxable part, if any.

Based on what you have told me, the gain for the period between the date you bought the 1983 property to the date you moved out in 1993 should be exempt as it was the only property you owned and you will certainly get exemption for any part of that ten years that you actually lived in it. However, whilst you had no financial interest in the rented accommodation, in the absence of a main residence election, it can be treated as your main home based on the facts, ie where you lived for those ten years. This could scupper your CGT exemption for those ten years.

Take a look at the notes in CG64500 here. You might consider making a nomination now for the 1983 property to be treated as your main residence until 1993 under Extra Statutory Concession D21.

The gain for the period from the date in 1993 that you bought another property (which you nominated as your main home) until 1996 will be a taxable gain as will the gain for the period from the date in 1996 you bought the property with your husband until its disposal in 2010.

When you put your husband's name on the deeds of the 1983 property, he took your purchase date and half the purchase price as his own for CGT purposes.

You moved into the 1983 house in 2010 so from that point it will be treated as your main home assuming you have no other property. The gain for the period between your moving in, in 2010, and when you sell it or up to three years after you move out will be exempt from CGT.

If there is any taxable gain after you have extracted the gains for the exempt periods, each of you and your husband will be entitled to utilise the annual CGT exemption which currently stands at £10,900. That will cover at least £21,800 of any taxable gain.

I hope this helps but let me know if you have any further questions.
Customer: replied 3 years ago.
Thanks, XXXXX XXXXX helpful. I was claiming MIRAS on the 1983 house till 1993. Does that mean that the tax people accepted it as my main house?

Is there any way I can establish for sure whether 1983-1993 is exempt from CGT?
The fact that you got tax relief on your mortgage interest does not mean a tacit acceptance by the tax office that the 1983 property was your main home for the first 10 years. The would not have been aware necessarily that you were not living there.

If you look at the link I gave you in my previous post (here), this may not become an issue until you sell the 1983 property, you have two options as follows::

1 Wait until you sell the 1983 property and claim main residence exemption for the first ten years as well as the other periods I previously mentioned under ESC D21.

2 Write to the tax office now and make the ESC D21 claim now.
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