Principal Private Residence - 2 homes

Principal Private Residence - 2 homes

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Client lives in Yorkshire. Has done for many years. He got a new job in London in April 2011, so bought a flat there. He has since lived in London midweek and returns to the 'family home' in Yorkshire at weekends.  Wife stays in Yorkshire most of the time, but occasionally spends the odd week in London. Client has now told me that he would like to treat the London flat as his PPR with effect from the date of purchase (April 2011). Am I correct that there is a 2 year time limit for the election? No chance of a late election?  How is an election made?  Do both husband and wife have to make the election (both properties are joint)? Is any proof required re PPR - electoral register etc ?

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By pauld
17th Jun 2013 15:31

Time limit passed

You are correct in that there is a 2 year time limit to make the election so it will now be based on fact. As wife lives in family home in Yorkshire, this will be treated as main residence. If rented the london property before buying then you could make a claim under ESC D21, which extends the time limit. Husand and wife can only have one PPR.

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By John Hughes
17th Jun 2013 17:16

Thanks, but...

can they not elect for London to be PPR wef 2 years from todays date ?  How is an election made - there doesn't seem to be a hmrc form?

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By Paul Soper
17th Jun 2013 17:26

Two year limit

Th time limit starts from the date the second or subsequent property is available to be occupied as a residence, not the date of acquisition, and HMRC do not have a form to use to make the election.  The law requires a notice (ie a letter will do) addressed to HMRC to identify which of the two (or more) properties will be the main residence and the date from which this will be effective.  If it affects both a husband and a wife it must be signed by both of them.  No late election but... if he were to acquire a third property it would resurrect the right to make the election for a further two year period.

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By pauld
18th Jun 2013 08:50

Second property

If the property in London was purchased and was available to be occupied in April 11, then you are too late to make an election.

 

 

 

 

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By Paul Soper
18th Jun 2013 09:03

You've got it

Exactly right.

On the facts it is clearly a residence but not his main residence.  Only by acquiring a third property could he then elect for number two be a residence which might be worth considering. He could use the profit from the sale of number two to finance the acquisition of number three BUT finances the acquisition to enable property three to be acquired; he now has three residences reviving the right to make the election, makes the election in respect of number two which has been his residence so that is perfectly legal, disposes of property two, electing back to either property one or three.  The gain on property two will be exempt because of the last three year rule and having now elected he can vary it between property one and three to his heart's content.  This assumes two important things - that three is acquired before two and three also becomes a residence like two.

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By pauld
18th Jun 2013 13:03

Does this work?

Rent out the london property for a period, say 6 months shorthold tenancy. Once rented its no longer considered a residence for PPR purposes. After say 6 months, say goodbye to the tenant. At this point there is a change of residences i.e. from 1 to 2 , and 2 year period starts again. Lets say its now Jan 14. Make an election to nominate London property as PPR from Jan 12. Then vary election to make Yorkshire property to be PPR from date london property let e.g. July 13. Then vary again to nominate London property as PPR from Jan 14.

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By Paul Soper
19th Jun 2013 09:36

No

s222(7) says that the interpretation of the period for which determination be election is relevant is the period beginning with the date at which the base cost is incurred, hence you can't revive the right to elect by merely letting the property out, only by incurring fresh consideration for the acquisition of a property.

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