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rental property and claim as PPR

rental property and claim as PPR

I've two houses - both of which I rent out. I'm caring for my elderly parents, so live in their house with them.

But, in the times when my rental properties are empty, I go live there for say a month in-between tenants to decorate etc. I live there for that month or so.

So, do I need to make a "claim" to the HMRC for periods I live in the rental properties to keep my PPR allowance when I come to sell? Like do I need to build up a "dates rented dates lived in" list?

Or because i live in a property I don't own, can I allocate one of the rental properties as my PPR although it's rented out? Then switch each year or whatever?

If I need to make any claims, will a letter do, or should it be on a specific form?

Thanks.
Paul

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By Anonymous
12th Feb 2009 10:51

from One Pete to another.
I agree, and the anti-avoidance legislation framed for the builder who moves house annually ( no good, now prices are falling) is in section 224 (3) and applies if the purpose of moving in/ acquiring the property was 'wholly or partly' for the purpose of realising a gain. Trouble is that applies to about 50% of South England ..........who all thought that their property was to be their own tax-free pension fund in the years to come.

So where to draw the line. Did he move in to the house to escape his Mum and Dad, and then he did a bit of decor work on the side. Nothing wrong with that.

Or was it the case that the sole idea of moving in was to make money. The Motive or purpose of the action is the key! Tricky.

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By Anonymous
11th Feb 2009 23:14

Typo
Just a Typo.

Quote 'you are denied ''only or main residence'' PPR relief where you spend money to realise a gain upon disposal.'

Regards Peter

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By Anonymous
11th Feb 2009 10:58

Hi Peter, Yes there is some element of residing there but we do not have the facts. If he is just bunking down in one room for the purpose of being able to redecorate the rest of the house then it will not qualify. HMRC are getting hot on this type of election. Moving in and claiming the property as his PPR would need the express permission on the B2T mortgage provider as it is a change of use and from experience they do not like doing that for short periods. I have been party to several landlords trying this and failing either at the first or subsequent questioning by HMRC I quote " private residence relief is denied where it is deemd to be for financial gain" I 'll check the woring when I am back in the office tomorrow. If it was truly to be his hom ethen the re-decoration will not be deductible from the rental revenue as it would no longer be in the business. I dealt with an appeal last year where the LL moved in to one of his rental properties and refurbished it and eventually sold it after 5 months. He moved back to his former address, which was a rented property, i.e. he did not really move. The property was up for sale shortly after he moved in. HMRC deemd that there was no intention to make the property his residential home and denied any PRR relief. The outcome was as I had advised him but he tough it was worth a try. Regards Peter

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By Anonymous
10th Feb 2009 18:26

PPR relief
Starting at the top, PPR is a relief, NOT an exemption. See section 223 TCGA. I like Taxation Pete's reply. But, I think if you do live at the property for a month, then if you are sleeping there (and popping back to see your Parents -- from time to time??), then that is where you live.

If you pay the rates/ notify the Council that the Council tax is correctly due by you [not on an empty property], pay the gas and the telephone/ electricity / water rates (?) and mow the lawn or Dyson the apartment / house, mow the garden, then that is not vacant. It is occupied. It is occupied by you. You own it. You receive correspondence there, and you pay bills. Thus if that is where you reside, it is your residence. You may have a residence at your parents house. It may be their property. You may have a right of entry as a tenant....but if it is just an informal free tenancy, I do not see why sectuion 223 does not apply to your property. You should write to the HM Revenue or employ a decent tax adviser. Section 222 clearlty gives you a right to elect for the property.

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By Anonymous
10th Feb 2009 15:02

PPR
Fom what you have said, you do not qualify for PPR. The courts have ruled that it is the quality not the quantity of residence that makes it your PPR. You have not moved in Lock ,Stock and Barrel and no doubt the property had not left your rental business as it was being advertised for letting. It is probably on a B2T mortgage so there is no chance of PPR. As has been said keep a note of the dates as they may quality as residential period in the future if you actually moved in and truly lived there for 9 to 12 months.. HMRC do not state a minimum period but in practice this qualifies is all communication addresses and electoral role DVLA and HMRC address is there. However if you where to sell up then move back to the same private address then HMRC may well pick up on that and question it, and HMRC have the right, and do, decline a PPR calm if they believe the PPR was done to make financial gain. I would also comment that if you are caring for your parents, who cares for them when you go decorating for a month or two and are you recieving carers allowance, as this would ring alarm bells at HMRC. Regards Peter

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10th Feb 2009 14:26

PPR
I agree with Euan, but I'd add that if either of the properties you own have ever qualified (or does in the future) as your PPR you keep a note of the dates, as you will qualify for exemption for the residence period, and maybe letting relief for any subsequent let period.

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10th Feb 2009 13:45

Quality of residence
You do not claim a PPR allowance - it is an automatic exemption from capital gains tax on the sale of a property which you have owned and which has been your residence. The only time you have a choice is to elect which of two residences will qualify as your principal residence for the PPR exemption.

Your problem is whether the basis on which you occasionally occupy one or other of your letting properties is good enough to establish it as your residence. If you only occupy a property for the odd month in gaps between letting it to tenants, perhaps while some redecoration work is done, it is very unlikely to qualify as your residence. Your residence is, amongst other things, the address to which correspondence to you (not least from the Revenue) is sent and the address under which you are listed on the electoral roll. If that is your parents' house, that is your residence and as you do not own it, the PPR exemption is not relevant.

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