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PPR on next door property knocked through?

Can PPR be claimed on next door house where property was knocked through to main home?

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A client purchased the adjoining terrace to his main home.  Having a large family, he knocked through an opening at the top of the stairs and the family lived accross the two houses. Two separate entrances were maintained and from the outside looked like two separate houses.

He has since blocked up the opening and sold the next door property.

Would the neighboring property qualify for PPR, or is a doorway opening a little tenuous?

Replies (40)

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Psycho
By Wilson Philips
09th Oct 2019 12:13

What did Planning say? Was there a single Title?

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Replying to Wilson Philips:
Lone Wolf
By Lone_Wolf
09th Oct 2019 12:16

I'm willing to bet that there was no planning for this arrangement. Just a hunch.

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Replying to Lone_Wolf:
Psycho
By Wilson Philips
09th Oct 2019 12:18

I'm not going to give you very long odds.

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By Cat's whiskers
09th Oct 2019 12:24

I very much doubt planning were involved.

So assume two titles remained...

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Replying to Cat's whiskers:
Psycho
By Wilson Philips
09th Oct 2019 12:31

"I very much doubt ..." is not going to get you a conclusive answer.

But if you're right (and I suspect that you are) then I'd say no PPR on the second property (in absence of an election, which would of course have affected the status of the first).

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Hallerud at Easter
By DJKL
09th Oct 2019 12:45

Number of Council Tax bills might be another area of interest re argument. Also we are not told if the "connection" was created as soon as acquired or did the other property have a distinct existence for a period in his/her ownership. Insurance paperwork might also give some clues.

Planning is interesting, have over the years seen a fair few retrospective acceptances of planning status where no formality over application/process was evident.

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By Tax Dragon
09th Oct 2019 13:00

Planning? For putting a door in a wall?

TBH I don't think you need to read past s222(1)(a) before you can answer this one.

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Replying to Tax Dragon:
Psycho
By Wilson Philips
09th Oct 2019 13:14

Well, I'd be surprised if you didn't need planning to turn two properties into one, however done.

Why do you think we don't need to read past section 222(1)(a)?

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Replying to Wilson Philips:
Hallerud at Easter
By DJKL
09th Oct 2019 14:29

I would agree that given initially two distinct properties planning would likely be required, certainly at a minimum I would expect at least a warrant and a completion certificate.

I can always ask my daughter who just (yesterday) was told she has passed her MSc (with distinction I will proudly add) in Urban and Regional Planning (as she now hopefully marches onward to become a Chartered Town Planner) ,though suspect she can probably explain the creation of a Regional Masterplan but has not a clue re two houses becoming one. (Similar to graduate accountants in another thread)

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Replying to Wilson Philips:
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By Tax Dragon
09th Oct 2019 14:18

Wilson Philips wrote:

Why do you think we don't need to read past section 222(1)(a)?

Because, unless what has been sold is, or is an interest in, a dwelling-house (or part of a dwelling-house) which is, or has at any time in his period of ownership been, his only or main residence, the exemption is not in point.

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Replying to Tax Dragon:
Psycho
By Wilson Philips
09th Oct 2019 14:25

So - if it is concluded that the property had in fact become one you would agree that the exemption is in point?

But if it is concluded that the properties remained separate, we do not have enough information to establish which one was his only or main residence, do we? (We can make an educated guess of course ...)

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Replying to Wilson Philips:
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By Tax Dragon
09th Oct 2019 14:37

Yes, in my eyes our answers complement each other, they do not conflict or contradict.

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By adam.arca
09th Oct 2019 13:00

Intention is another issue.

Retaining two separate entrances and subsequently selling the 2nd property without also selling the original isn't going to help the PPR argument.

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By ireallyshouldknowthisbut
09th Oct 2019 13:42

There is big section in HMRC's manuals on one dwelling vs two dwellings which might be worth a look.

Whilst I would initially assume its probably two dwellings, the facts of course will determine the outcome....

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Replying to ireallyshouldknowthisbut:
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By Cat's whiskers
10th Oct 2019 12:45

I'd already consulted the manuals which are of course guidance only. Couldn't find anything mirroring my case although I did wonder if the application of a single dwelling house to a group of flats could be extended. Similar enough?

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Replying to Cat's whiskers:
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By Justin Bryant
10th Oct 2019 15:38

Yes; this looks like the opposite of what's going on in the link below, so PPR s/be OK:

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65265

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Replying to Justin Bryant:
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By Tax Dragon
10th Oct 2019 15:45

Agreed... if (and I think only if) the reverse actually happened, i.e. 2 (legally) became 1.

Living together is not the same as marrying.

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Replying to Tax Dragon:
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By Justin Bryant
10th Oct 2019 16:19

There is no need for any legal form here re the house (see: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64309 ). The substance is all that matters - like with SDLT separate dwellings and no locked interconnecting door points to 1 rather than 2.

A shame PNL has left as she loved this sort of stuff I recall.

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Replying to Justin Bryant:
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By Tax Dragon
10th Oct 2019 15:55

We'll find a replacement. She's a bit like Dr Who (who actually is now a she).

Your substance-over-form assertion is the key point. Do you have back up for it? The large undivided house is one legal property at the start of CG65265, three at the end.

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Replying to Tax Dragon:
Psycho
By Wilson Philips
10th Oct 2019 16:31

Agreed - with TD, not necessarily JB. Merely punching a hole in the wall does not necessarily convert two self-contained dwellings into a single dwelling - unless planning consents, building warrants etc to that effect are obtained. Also, one imagines that in the case of conversion of a house into flats, each flat would usually have separate title. Conversely, for the reverse to apply, one would expect a single title to subsist.

Have a look at SDLTM00410 and following paragraphs. Where the existence (or absence) of a lockable interconnecting door is certainly one factor to take into account it most certainly is not the only one. We can only guess at the specifics of this case (were there, for instance, separate utility meters etc etc etc). And, yes, legal form is also a factor to be taken into account.

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Replying to Justin Bryant:
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By Tax Dragon
10th Oct 2019 16:57

I really wish both of you would stop editing comments. (I really wish Sift would remove that functionality.)

PLEASE post additions as new comments.

I don't see how the self-contained units scenario helps. If anything, it hinders, as it's similar to what we have here. It would be interesting to have this discussion on the assumption that the entire interior of both houses was stripped out and replaced with what would feel like a single house from the inside. But still, all your examples are about one legal title being divided up. That's not a situation of difficulty. Do you have an example of two becoming [or, rather, not becoming - but still being taxed as] one?

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Replying to Tax Dragon:
Psycho
By Wilson Philips
10th Oct 2019 17:03

Point taken about editing comments. I do so only because I consider it neater to qualify an existing post rather than post an addendum that might end up several posts down the page and potentially make little sense out of context. At the same time, I acknowledge the problem that by editing (a) it might not be read and/or (b) it might make responses to the original post look out of place.

But again I agree with you - in absence of further information about the property in question I'd say that the guidance linked to by JB weakens, rather than strengthens, his argument.

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Replying to Wilson Philips:
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By Tax Dragon
10th Oct 2019 17:35

Specifically, (Justin's) adding that link as an answer to my subsequent question is frustrating - for me, because I could easily have missed it; for anyone reading this discussion cold, because they could easily fail to realise it was supposed to answer that question.

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Replying to Wilson Philips:
Hallerud at Easter
By DJKL
10th Oct 2019 17:48

Conversion of one into many would not up here of itself result in distinct separate titles, we did a couple of developments (I appreciate up here in the frozen north) where our ownership of all the properties (27 in one and 34 in the other) all remained on their original titles until we sold the individual properties about 15 years after we created them. These were of course commercial to residential but the conveyancing concept is the same, on each sale break off disposition and letter of non crystallisation from the holder of the Standard Security over the total.

Certainly up here when you create extra dwellings what you need is a completion/habitation certificate and certificate re electrical compliance, not a change /split in title, that is really only needed when you come to sell.

Having said the above we do have a very different legal system re property conveyancing.

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Replying to DJKL:
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By Tax Dragon
10th Oct 2019 18:03

(Justin's link to) CG64309 could be relevant to you.

Do you think it reverses, either side of the border?

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Replying to Tax Dragon:
Hallerud at Easter
By DJKL
10th Oct 2019 18:21

Sorry, not really getting the point, what reverses?

I agree with Justin that whether or not there is a dwelling is a question of fact and I do not believe it requires distinct title re each individual dwelling- if one considered a highland estate with large house, shooting lodge, staff cottages etc, there is a fair chance they all reside in one title.

For example we bought one of our properties in the early 1980s (I have recently been poring through the titles re repairing obligations), we purchased two flats and an old warehouse/shop/pend all on one disposition, each unit only acquired distinct title when sold to A N Other. (In fact we sold the two flats and offloaded all the roof obligation to them, why I was checking, the part of the warehouse etc under that tenement now having a free carry)

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Replying to DJKL:
Psycho
By Wilson Philips
10th Oct 2019 18:27

Agreed that multiple properties can be held under a single title - block of flats is an obvious example. I was simply suggesting that after converting one might create separate titles to faciliate sales of individual units, but appreciate that such individual titles can be created on sale.

In any event, the point - I think - is that the title issue is just one of multitude of factors that needs to be considered. The mere creation of a doorway between the two may or may not be determinative on its own.

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Replying to DJKL:
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By Tax Dragon
10th Oct 2019 21:05

DJKL wrote:

Sorry, not really getting the point, what reverses?

Erm, this:

DJKL wrote:

whether or not there is a dwelling is a question of fact and I do not believe it requires distinct title re each individual dwelling- if one considered a highland estate with large house, shooting lodge, staff cottages etc, there is a fair chance they all reside in one title.

One property can comprise many dwellings, but in your highland estate example they may all be part of one dwelling house for PRR purposes (the staff cottages may well be within the curtilage of the manor... maybe the shooting lodge is outside... I don't know, you decide, it's your example!)

But none of that's relevant to the OP. The question there is the reverse: can properties with separate titles form one dwelling house?

Tbh I'd expect there to be case law on this - more so if the answer was "yes".

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Replying to Tax Dragon:
Hallerud at Easter
By DJKL
10th Oct 2019 22:40

Cannot see why not.

If I were assembling a site piecemeal for building purposes from disparate owners I might have two or three distinct dispositions acquiring the site and accordingly the title to one of the dwellings I subsequently build, owning rights in common with all others on the site over the entirety of the common parts assembled from the dispositions, would rest on more than one disposition and possibly Land Cert.

As an example,we acquired a site above Kinross where the core site was acquired as one purchase and the surrounding lands (a further 150 acres) was acquired as another. (different sellers).Whilst no houses have yet emerged (planning for 35) groundworks are due to start this year. Once dwellings are built (with a completion cert ) and are ready to be sold ,each of their titles will quite possibly, for that period, rest on two distinct land registry certs (titles), the first covering the actual grounds on which the individual property gets constructed, the second on the common parts, site roads, amenity areas, etc (or of course its garden might well (probably will if built as existing site drawings) in some parts straddle the two titles).

At one point we were going to carve up large tracts of the non built acres into pony paddocks/allotments/small fields (marketed as buy a house with its own adjoining pony paddock etc) both would be sold to the same person but until sold to them, creating one land cert title, title to the dwelling containing both areas would have rested on the two land certs. (albeit 0.5HA might have become an issue here re CGT for the bigger ones)

Whilst I am no longer day to day connected with the build (we sold the site with an overage) I will likely be slightly in the loop with the legals as we are a secured creditor, so will update in due course whether any dwellings do emerge resting initially, before being sold on, upon two titles- I suspect there is a strong chance they will.

Then again- we do have a different conveyancing system/legal basis of land holding up here. (That and a poor national football team- not a good evening)

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RLI
By lionofludesch
09th Oct 2019 17:57

Sounds like a single PPR to me, occupied de facto as his home.

I'm open to clarification of the facts but this is a very different scenario to a bloke who has a second home hundreds of miles away.

Planning permission would be good evidence but the lack of it isn't fatal to the claim. He might have other evidence

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
09th Oct 2019 18:35

Agree, whilst having PP would really help his claim its absence does not kill it, absence merely makes demonstrating the single dwelling argument trickier.

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Replying to lionofludesch:
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By Tax Dragon
09th Oct 2019 18:55

A receipt for a door, perhaps? And then for some bricks to close the gap? Generally, stuff that "de facto" happens leaves a trail.

The trouble (for me) is that, even with such evidence, unless legal steps were taken to combine the properties (and we're assuming they weren't... though I'd be asking the same sort of questions about bills that DJKL suggested - does no harm to know), then all the case law about more than one building within one curtilage being one dwelling house is of no use - because there wasn't at any point a single curtilage.

Which is where I think Wilson is coming from too.

HMRC manuals on PRR are, IMHO, very good. Defo worth reading through when cases like this crop up. [Endorsing ireally's comment above.]

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By Cat's whiskers
10th Oct 2019 12:48

Thanks everyone for taking the time to reply.

My client isn't keen to pursue a claim (I suspect a lack of official/ legal combining of the two properties and a reluctance to open a can of worms!)

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By Tax Dragon
10th Oct 2019 21:56

I've thought of a possible example of multiple properties forming one dwelling house, courtesy of Lion.

The Irish border, he said, passes through someone's bedroom.

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Replying to Tax Dragon:
RLI
By lionofludesch
10th Oct 2019 22:03

Definitely a few houses straddle the border.

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
10th Oct 2019 22:44

In Edinburgh we had ,straddling the old Leith/Edinburgh border, The Boundary Bar.

"The Bier Hoose bar, formerly known as The Boundary Bar and City Limits bar, stands on the old boundary line between Leith and Edinburgh. Prior to 1920, when Leith and Edinburgh merged, it was necessary to use both entrance doors because Leith and Edinburgh magistrates set different licensing rules. The main effect of this was that the bar on the Leith side served until 9.30pm and after that the customers could adjourn to the Edinburgh side to enjoy additional drinking time.[4]"

https://en.wikipedia.org/wiki/Leith_Walk

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Replying to DJKL:
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By Tax Dragon
11th Oct 2019 06:54

I don't particularly have an issue with that - it sounds like a good excuse for the Leith Magistrate or similar to be at the bar at closing time. The Irish example does play havoc with my fiscal neurons though (as I've always admitted, I don't have many property law neurons to utilise). Does that mean (ownership of) half the house is registered with Her Majesty's lot and half at Dublin? Can it be sold in a single contract?

If the answer to that last question is "no", then I'd have to acknowledge that the sales would nevertheless be of parts of a dwelling house, and that remoulds my previous thinking. If so, I'd now agree with Justin. Oh and Wilson. And Lion. And you. If these cross border properties are sold and conveyed as single units though, I'll pop my rear on a fence (seems only appropriate!) and ponder some more.

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Replying to Tax Dragon:
RLI
By lionofludesch
11th Oct 2019 09:54

It's a bu99er when you have to pass through Customs to get a beer from the fridge.

Wales was full of border anomalies at one time. There were your traditional pubs straddling the English border plus a few at "wet" and "dry" county borders.

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Replying to lionofludesch:
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By Tax Dragon
11th Oct 2019 10:21

Presumably you'd make sure the fridge and the settee were in the wet side and you could have the TV on the dry side.

Much as the anomalies are fun, do you know how you would go about buying a property that was partly on one country, partly in another? Is it (I guess this is the point) "a" property?

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Replying to Tax Dragon:
Hallerud at Easter
By DJKL
12th Oct 2019 15:45

With possibly two firms of solicitors or a firm that can practice in both jurisdictions. It must be common in the Borders, there will be farms/estates straddling the border and requiring two conveyances.

Though not the same we recently did a sale of a ship and the solum (bed of the river) where it was moored, this was done via one contract that stated the two distinct sales (there were actually two companies we had owning the bits) and each sale was conditional on the other. In your example not convinced that would work as in our case both were governed by Scots Law, in the case of land across a border that would not be the case, I think two contracts would be needed.

I suspect a whole farm straddling the border sold as an unum quid would need some form of cross suspensive condition in each contract but once we get to the complex with our legals I tend to consult some friendly solicitors re the art of the possible

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