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Married couple have decided to relocate and live in the country, they are keeping their existing property which will be let as a holiday let (it may/may not qualify as a FHL). They will mainly be living in the new property but will stay in their previous property several weeks of the year visiting friends and family.

They are expecting to keep both properties for the long term but the existing property is the more likely to result in the most capital appreciation due to its location. 

I have a couple of questions around this scenario:

1) As the existing property is being let for most of the year when they are not staying there, are they not able to elect for this to be their main residence? 

2) Irrespective of the answer to the above, Is there a minimum period a property has to be elected to be your main residence in order to take advantage of having the last 9 months classed as your PPR or in theory could you elect for a property to be your PPR for a month and then reelect the existing property?

3) If the existing property does qualify as a FHL and all other BADR (ER) conditions are met how would the gain be taxed on a future sale if it not possible for the property to continue to be their PPR? e.g. if they sold the property in 5 years time and made a gain of £300k, say they lived in it previously for ten years (from when they purchased it), is it as simple as:

Gain                               £300k

Less: PPR  x 129/180   (£215k)

Taxable gain                   £85k

Tax @ 10% (irgnoring AE) £8.5k

Replies (2)

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By Paul D Utherone
07th Apr 2021 10:47

1) once one might have said yes, but based on recent cases I suspect that there would not be sufficient permanence. Then again what does it gain you as you already have the final 9 months from actual residence to date (on current rules)

2) No, but as for 1 in the scenario envisaged seems unlikely to be relevant.

3) I believe so if all ER conditions met

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By SA2016
07th Apr 2021 11:00

Thank you for your comments. It gains the future increase in capital being exempt from CGT in my opinion.

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