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PPR election

My client is a property developer based in London during the week with a family home in the country where he and his family live the rest of the time. He had a London flat where he used to stay on occasions during the week for convenience. His wife never stayed there and neither did his children who go to school local to the country residence. The flat was in joint names with his wife.

My firm was appointed to act within 2 years of him selling the London flat (at a significant profit as it was during boom times in 2006/7). We submitted an election under S.222 TCGA 1992 in joint names for the flat in good time and a month later submitted an election for the family's country residence. The guidance states that provided a property has been used as a taxpayers home an election will be valid irrespective of how long he lived there. In other words a taxpayer cannot nominate a property he has never lived in but otherwise once an election is submitted it is beyond question.

HMRC are enquiring into his return and on the subject of the London flat are saying "The information I hold suggests the property (the London flat) was disposed of at a substantial gain and in view of your client's claim that the gain is exempt I would like to see more evidence that your client satisfies the conditions for relief. Based on information held your client does not appear to meet the criteria for relief so please provide full documents in respect of the acquisition and sale and any enhancement expenditure."

Any thoughts or comments would be appreciated? Is it a potential problem that the client's wife never stayed there and therefore although it was a residence of the husband's it was not of the wife's?


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Difficult to say ...

... based on what little we know about the actual circumstances, but your words "he used to stay on occasions during the week for convenience" suggest that a claim may be difficult to support.

Staying in a property on the odd occasion does not make it a main residence. Considerable amount of guidance and case law on the subject so no point in repeating it here. In a nutshell, did he take steps to make it look as though it was his 'home'? In other words, it boils down to quality, not quantity - similar to moving into a property for a short time in order to try and secure last 36 months PPR.

Wife's non-occupancy should not in itself cause a problem (there has been debate already on AW about whether a wife can validly make a joint election for a property she hasn't occupied - I believe that she can) but will probably not help your case in deciding whether, based on all of the facts, the husband's occupancy was of sufficient quality to make the flat the couple's home.

If it were the case that he regularly spent, say, 3 days in the flat and 4 days in the country, that may make your job easier, but to repeat staying "on occasions" doesn't sound hopeful.

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In order to make the election, it only has to be a residence

In order to make the election, it only has to be one of the taxpayer's residences. It does not have to be his main residence. See the very recent main residence relief case which the Revenue should never have brought. Basiclaly the upshot was "if you can only make an election in repsect fo soemthing that's your de facto main residence, there's no point in the legislation allow you to make an election."

Trying to catch up on post 31 Jan stuff, but if you can't track the case down, let me know.

It therefore looks as if either:

you've got someone at the Revenue with the wrong approach, similar to the recent case; orthere's some doubt over the other conditions for the election eg it was never a residence of your client. (Doesn't sound like this in your case, but, if, for example, the property was let out, it couldn't be one of your client's residences unless he had an extremely understanding tenant!)

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Sloppy wording on my part

I should not have used the word 'main' in my second paragraph.

But the point remains that in order for an election to be valid, ie to treat a residence as a main residence, the second property must first "only" be a residence.

To cite just one case "... a person is not entitled to claim to be a resident at a given town merely because he pays a short, temporary visit. Some assumption of permanence, some degree of continuity, some expectation of continuity, is a vital factor which turns simple occupation into residence"

To repeat, I don't know nearly enough about the actual circumstances to offer an opinion as to whether HMRC have a valid case - and neither do they, asking as they have for further information. But I would be concerned about the occupancy "on occasions". The facts will speak for themselves.

At the end of the day, if you can't convince the Inspector, it doesn't matter what anyone here says - your client will need to consider Review and Tribunal.

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Thank you very much BKD for your replies but that's not what the Revenue manuals say i.e if it is a residence of yours and you elect within the necessary time frame then the election means all other factors are ignored. The points you raise only come into play if no election is made and you are trying to argue that a property is your main residence.

This is the way I read it anyway and the other answer given seems to back that up unless someone can correct me?

My concern was whether the wife having not stayed there would cause a problem i.e it has been his residence but not hers.



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I was concerned over the timing of the election

The OP refers to his firm being appointed to act within two years of sale and then making the election in good time.  The election should, of course, have been made within two years of having two residences.

The second election (one month later) for the family's country residence was unnecessary, unless there's also another residence not mentioned.

The case that MJ Shone is referring to is Ellis.

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Thank you for your comments. The London flat was acquired in Jan '06 and sold in Jan '07. We submitted a PPR election in November '07. The objective of submitting the second election back to the country home was to qualify for the last 3 years on the London flat (thereby complete exemption) and only missing out on 1 month PPR exemption on the country home. This is exactly what many of our MP's were doing of course!

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Thanks for the link to the case, George ...

... which more or less confirms my point. HMRC's case was thrown out because they had already conceded that the property in question was a residence. Earlier in the case, it had been mentioned that there may have been a need to consider whether it was in fact a residence, though that need was removed by the subsequent change of emphasis in the Revenue's argument.

And a very good point on the 2-year limit.


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Please can you just confirm...

... when the flat became a residence, and when you made the election?

Incidentally, BKD isn't disagreeing with what you're saying.  He's simply pointing out that it's not sufficient to simply stay in a property occasionally for it to be considered a residence in respect of which the election can be made.  There must still be some quality of occupation when the person does reside their.

On the does it matter whether the wife has resided there point.  There are two schools of thought:

No it doesn't as long as hubby resides there and H&W jointly make the election.Because H&W can only have one main residence and must jointly elect, then an election isn't possible for a property that isn't a residence in relation to the wife.

I think I lean more towards 1, and I know that that's BKD's view.  Cathy Grimmer's a well regarded practitioner and, I believe, leans towards 2.  I suspect HMRC might favour 2 as well.

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PPR Election

Flagging for future reference

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Would point you to 2 as does the fact that the wife never stayed there. Regards Peter

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Without wanting to resurrect that argument again ...


Consider the theoretical case (I've no doubt real cases exist) where a husband lives in one property and the wife in another. They are not separated, so still "living together" for CGT purposes. Which property is the main residence? I submit that in the absence of other conclusive evidence that question may be decided only by election.

@TaxationPete - I don't see the relevance of that paragraph, It simply deals with the situation where there are 2 properties and no election is made (or if made, invalid)

EDIT - comment added to as George was posting his below

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Those are just tests of which of two residences are the main residence, absent an election.

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Read it again "However where

Read it again "However where a notice is not made, or an invalid notice is made,"

Tthe notice is invalidated by the facts.   Regards Peter

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How is the noticed invalidated by the facts? unless it has been made out of time?

Or are you simply saying that you're in camp 2 and don't consider that a valid election can be made for a property that the wife hasn't lived in?

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Which facts?

Your previous post implies that the paragraph in question is support for the view that a wife cannot nominate a property that she does not live in. But now you seem to be turning it on its head, and saying that because a wife cannot so nominate, an election would be invalid and the provisions of that paragraph will apply. Where, therefore, in that paragraph (or anywhere else for that matter) does it expressly say that a wife cannot join in an election for a property that she doesn't live in?

And reading the legislation further, s222(6) says that where an election affects both parties, both must make the election. I struggled with those words, wondering how an election could be made that did not affect both parties (and, to be honest, am still struggling). However, would it apply in this scenario? Husband and wife living in house (currently OMR) at Lands End. Husband takes a long-term contract in Thurso and buys a house to live in there. Arrangements are made which, on the face of it, would make that house his main residence in the absence of any election. So, which is the main residence of the couple? Who decides? Cornish property is showing huge gain so he nominates that property to settle the question. Arguably, the nomination has no effect on the wife (because it is already her MR), so she does not need to join in the election. However, husband is entitled to nominate Thurso property instead as his main residence. That would certainly affect the wife's position, so she would need to join in the election in that case. That is all that the legislation requires.

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so section 222 says that

So section 222 and 223 says nothing about which house each spouse actually lives in, so long as they are not separated, they are living together, in my book.  That means they can choose under [....."the individual may conclude that question by notice to an officer ..."] section 222 (5).    You need to conclude which residence within 2 years of the choice existing.

You need to make a joint election.  Obviously one spouse needs to reside where the children go to school, but if the other spouse happens to work in another City, and has bought a residence there, [either jointly or solely, in the UK or overseas, whether under a 6-month tenancy or a leasehold / freehold property] where he or she resides, then that is a residence.   So a timely joint election solves the predicament.

Section 224 [3] says that section 223 PPR relief shall not apply if the acquisition....was made wholly or partly for the realising a gain from the disposal.....

This is a difficult clause to square up to, in these times!

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This thread is getting confusing - or is it confusing itself?  A joint election would only be necessary if either of the properties were jointly owned.  If the Husband is the sole owner then the wife has no ownership of an asset to bring s222/223 into play.

Does her never having resided in the property affect whether the relief is available is what the question is about and that is the central question here.  The answer, of course, is it depends, and I always point out that our dear Queen has several residences, Balmoral, Windsor, Buck House etc, and she resides in them at the same time which is why, if she was chargeable to CGT and was minded to sell any of them this question would be pertinent.  If you don't elect the only exempt residence is the MAIN residence IN FACT - and I think we can be clear that that is not the property that has been sold.

He had a London flat and lived in it for convenience clearly, to me, indicates that this was also his residence and, provided that the original notice was to nominate the flat was as the MR and the second was to vary back to the country property, then the conditions of s222(5) have been complied with.  The only remaining fly in the ointment is whether the flaw was occupied by HIM as a residence and provided there is evidence that he did occupy it as such and this is backed up by utility bills showing gas/electric actually being consumed and there wasn't any silly trying to escape council tax by claiming it was empty.  What it will come down to is evidence that it was used as a residence rather than assertions that is was used as a residence.  The fact that his wife never stayed there is evidence of it NOT having been a residence so there needs to be evidence that it WAS to balance against that fact.

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In summary

Thank you to all. I think where we're at is that as the London flat was in joint names and a joint election was submitted in time HMRC cannot deny PPR exemption unless:


1. They can run the argument that the flat was bought and sold with a view to a profit. As H is a property developer and there was a significant profit in a short space of time (flat owned for about 12 months) this might be where they're going.



2. It was not a residence of H's on the basis that there was not enough quality (not quantity) time spent there e.g light and heat bills demonstrating actual residence, furniture such as a TV (with a TV licence) and ideally some other bills or correspondence going there.


Both may have to be put before a FTT and I fear that as a wealthy London based property developer our client may have a rough ride of it.

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Just to be pedantic., Paul

I don't believe that joint ownership is required for a joint election.

Reading the legislation, s222(5) says that an individual may make an election to determine which property is his main residence. So if we accept for the moment that a valid election could be made over the London flat, H is able to make that election.

But regardless of ownership, H & W can have only one MR. So, turning to s222(6):

Are H & W living together? Yes

Does the election affect the wife? It most certainly does, so the legislation requires the election to be given jointly.

Looking at the strict wording of the legislation, s222(6) does not require the couple to make a joint election in respect of each of them, all it says is that the election under s222(5) must be given jointly. Not an election, but the election. The election under s222(5) is that of the individual, so one interpretation is that the couple are simply notifying HMRC that the husband has nominated a particular property and that as a consequence, that property must also be MR of the wife by virtue of them being allowed to have only one MR. In other words, she is not actually nominating the property as her MR, she is simply joining in the election that nominates it as husband's, but accepting that will then make it hers also. Just one interpretation :)

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Both properties were jointly own "The flat was in joint names with his wife.".

Regards Peter

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I said it was getting confusing - jointly owned, hence joint election SHOULD have been made, and joint variation, however the issue of the wife having stayed there, or not, is still a question of evidence rather than assertion - and if it goes to the tribunal that's what it will succeed or fail on...

Another answer had raised the issue of 'affecting' and that is a question of ownership.

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Paulsoper wrote:

I said it was getting confusing - jointly owned, hence joint election SHOULD have been made, and joint variation, however the issue of the wife having stayed there, or not, is still a question of evidence rather than assertion - and if it goes to the tribunal that's what it will succeed or fail on...

Another answer had raised the issue of 'affecting' and that is a question of ownership.

I'd understood that the wife hadn't stayed there. But that doesn't necessarily prevent it being a (necessarily joint) residence, if it's a residence with respect to the husband; where he perhaps keeps his mistress. It's simply a question of quality of residence.

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Are you sure, Paul?

Paulsoper wrote:

Another answer had raised the issue of 'affecting' and that is a question of ownership.

Where does it say that "affecting" has anything do with ownership?

Assume that H is sole owner of second property. S222(5) says that he may elect that as his main residence. So are you saying that

(a) an election by a husband and wife can only ever be made where the property in question is jointly owned (which would make a s222(5) election invalid where only one party owns it) or

(b) that H can make the election, but W cannot join in since she is not "affected". Thereby making the property her MR even though she doesn't live there, she doesn't own the property and hasn't elected it as MR?

CG64525 says that a couple on marrying, each separately owning a property, can make an election as to which is the couple's MR. This is despite the fact that one will have no interest in that property, but will be affected by the election.

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Affecting, affecting...

A&B are married - A owns two houses, both are residences - B is not affected and a joint election is meaningless, on disposal of either B has no gain to be affected

A&B are married - they own one jointly, A owns the other, you need a joint election as it deprives B of residence status for her half, and of course if they each own one the same is true.

CGT is the most poorly written piece of legislation in the whole of the Taxes Acts -I'm trying to help the original query is all - what will matter is evidence not assertion.

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So where are we?

The above has established that a joint election was made in time.  Can HMRC question the validity of the claim.  In my view the first tribunal case re Mr PA Ellis (2013) indicates not.

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No expectation of continuity

Nobody so far has referred to the fact that the flat was sold within a year of acquisition. This is a major negative to me.

Normally it is very difficult to prove residence without an "expectation of continuity" existing when it was first occupied by the owner, and the fact that the flat was sold within a year would tend to suggest otherwise.

Of course it may have been a snap decision and you would have to look at all the circumstances, such as the reason for the sale and when the flat was first put on the market. There might indeed have been a pressing reason to sell the flat which was not contemplated at the time, and it might have been a quick sale. The trouble is, in the absence of any evidence as to the owner's intentions at the time, it's always a matter of retrospectively trying to prove what was in his mind at the time the election was supposed to be effective.

I always tell my clients to do things like have parties there, take photos and post them on Facebook, have an Amazon account showing it as the delivery address, shop locally and keep the receipts, keep clothes and personal effects there, decorate the property, etc. An accumulation of all these small things could add up to a substantial weight of evidence if HMRC chose to dispute the election.

The fact that the wife never lived there would not disqualify PPR on its own but would be a strongly negative factor in the absence of any positive ones.

Dare I say it, the late nomination could also be a negative factor. I know you can backdate an election up to 2 years, but only doing so after the flat was sold tends to suggest that the owner did not really think of it as his residence at the time.

In my view, this has echos of the M & B Harte case (FTT 258) in March 2012 where the owners had kept no real evidence that they intended to make an inherited house a permanent residence before they sold it and had to rely mainly on verbal representations, which failed to stand up under cross examination.

From what we've been told, I think this would be a very difficult case to prove if push came to shove.

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Thanks, Paul

Your analysis is pretty much in agreement with my own (and thanks for pointing out the all-too-obvious - except to me, it would seem :) - example of where an election does not affect one party to the marriage). But your second example is exactly what I had in mind with my earlier comments.

I also agree that CGT needs a complete overhaul.

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