......as well as having a UK home where the remaining 6 months each year is spent. No PPR election has been made and the overseas home is to be sold - and neither property has ever been used for anything other than the client's residence.
Can PPR relief be claimed on a proportionate basis against the overseas home?
Replies (20)
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No
You can have only one private residence and if you want one or other property to be treated as such an election needs to be made.
An election is only valid within a two year time frame from when you owned both properties. I assume you have remained UK tax resident.
Regards Peter
2 year time limt
Correct - except that the starting point is not necessarily when ownership of both commenced. The starting point is when there becomes a question mark as to which is the main residence.
In this case, given the information in the question, it seems that the two are indeed one and the same.
No
there can only be one PPR so it is either/or.
As an outside chance could you mount a claim that the one now being sold was the PPR and that the UK one will become PPR as the sole property available after sale. That would of course be to accept that on the ultimate sale of the UK property for years to date, so you would have to guess some numbers to give a comparison.
If the present intention is to remain there until death, when probate would wash out the gain, then it might help, but does that by implication suggest that the UK property was the PPR all along?
Just throwing ideas about now & not suggesting that it will work but it might be worth a look.
Yes
(changing my initial answer). We don't know what the facts are, but if you are satisifed that the facts support the argument that each property was, at the relevant times, the main residence (having regard to HRC guidance etc on change of address, location of furniture etc) then I agree that the legislation should allow apportionment as you suggest
No
It's just I had not considered it that way having in mind the "only one PPR" maxim (and hence my No response), so you never know there might be someone at HMRC who wanted to test it all the way and I suspect if picked up - because you make a White Space note to stop off a later discovery - you might have some fun & games to come
Difficult...
It will not be easy to persuade HMRC that the overseas residence is the PPR. ACD Webb is right - there can only be one PPR at any one time. If the overseas property is deemed the PPR then the UK property will become the PPR on sale of the overseas property. An election is too late. If no election HMRC views ‘residence’ on the basis of quality rather than length of occupation, such that ‘even occasional and short residence can make a residence; but the question is one of fact and degree’ (CG64441).
There are two main conditions that need to be satisfied for PPR:
the property must not have been purchased for the sole reason of making a profit (s 224(3)), even if the individual lives in the house for a period before it is sold; andit must be an individual's only or main residence throughout the period of ownership (s 222(1)).
The first factor is not relevant in this case I presume. So we are looking to satisfy the 2nd condition. If you want the overseas property to be the PPR you are going to have to think of factors that will persuade HMRC that the overseas property is the PPR in comparison with the UK property. This will be difficult especially if the owner is UK domicile and UK resident. You dont say... is there dual nationality?
Suggest read further text... in the HMRC Capital Gains Manual the rules are detailed at sections CG64200 to CG65550 and include a flow chart at CG64270 which can help in deciding whether PPR is available on a transaction. In the HMRC ‘Capital Gains Tax for Land and Buildings Toolkit’, the relevant text is to be found at sections 13–21
What you are trying to say
is that on the facts when he was in the UK property it was his PPR, and on moving to the Greek property that was his PPR, again on the facts; so that each time he moves between them the facts are such that the PPR changes without the need to elect.
That was the reason for my tribunal comment earlier.
You might be able to mount an argument to the above effect, and a quick read of the legislation made me think "I wonder" and backtrack, BUT I still think you face an uphill struggle going by HMRC's propensity to take PPR claims to tribunal in recent years.
One might say why does everyone in the same situation not try a similar claim, and why has this never come up before; to which I suspect the answer is when offered the option of one completely exempt & the other not the client probably takes the line of least resistance.
Multiple PPRs
One might say why does everyone in the same situation not try a similar claim, and why has this never come up before; to which I suspect the answer is when offered the option of one completely exempt & the other not the client probably takes the line of least resistance.
I suspect the more likely answer is that the circumstances put forward in this case will be very much the exception. I have a number of clients with multiple properties which, when occupied, could easily be described in isolation as their main residence. But in all of those cases, they tend to live in one property more than the others. Where, as seems to be the case here, time is pretty much divided equally between 2 properties, I would be more comfortable in putting forward an argument as proposed.
Indeed
I started by saying multiple reasons, then forgot all bar one - DOH!One might say why does everyone in the same situation not try a similar claim, and why has this never come up before; to which I suspect the answer is when offered the option of one completely exempt & the other not the client probably takes the line of least resistance.
I suspect the more likely answer is that the circumstances put forward in this case will be very much the exception. I have a number of clients with multiple properties which, when occupied, could easily be described in isolation as their main residence. But in all of those cases, they tend to live in one property more than the others. Where, as seems to be the case here, time is pretty much divided equally between 2 properties, I would be more comfortable in putting forward an argument as proposed.
You might want to read
TC 01951 MICHAEL & BRENDA HARTE and the other decisions referred to therein.
Admittedly not on all fours with your case and neither are the other cases referred to, but they do give a clue as to the arguments to be rehearsed & the uphill struggle you are likely to face.
Whilst the argument may well seem viable on the facts you have advised you are going to need a lot of evidence to get HMRC to accept the switches of residence each year.
.
what gets me about this case is at para 13, page 4, line 19. it appears that the apellant's father who died in 1972 left a will containing a provision that the house be left with an Interest in Posession to his wife. Surely that created a trust arrangement from his death until the date of the wifes death on 20 May 2007?
The apellant only then owned the property from 20 May 2007 until it was sold a few months later.
Surely most of the gain would fall on the trustees and be covered by PPR due to the wifes occupation of it as a residence.
Am I missing something?.