Tax on sale of rented property

[tonywooding]

Dear Sir

Excuse me posting this also on the rental property thread.

I bought my flat in London in 1991, lived in it until 1996, and have rented it out ever since. From 1997 to 2000 I worked abroad during which time I got married. I came back to the UK in 2000 but, because my job back in the U.K was in Oxford, and because I now had a family of four, I was unable to re-locate back to the London property. I therefore rented for a year in Oxford, and then bought a second property whilst keeping the London flat. I transferred the London flat into joint names with my wife in 2001, for rental income tax purposes.

Can someone please advise me the following -

1.Given the circumstances, can I still claim Private Residence Relief on the London Property for the period I worked abroad (without having to live in it again at some time in the future)?

2.Can I claim Private Residence Relief on the London property for the year I rented in Oxford (prior to buying the second property)?

3.Considering my wife has never lived in the London property, although it is now in joint names, when we come to sell the property is she entitled to the same reliefs in the same quantities as myself, most particularly Lettings Relief and Private Residence Relief?

4.If she’s not entitled to the same reliefs as me, and I therefore choose to transfer the London property back into my own name prior to selling, does the fact that she has at some time joint owned the property with me, affect the reliefs I can claim?

Thanks
Tony Wooding

[Tax Accountant]

Dear Sir

Excuse me posting this also on the rental property thread.

I bought my flat in London in 1991, lived in it until 1996, and have rented it out ever since. From 1997 to 2000 I worked abroad during which time I got married. I came back to the UK in 2000 but, because my job back in the U.K was in Oxford, and because I now had a family of four, I was unable to re-locate back to the London property. I therefore rented for a year in Oxford, and then bought a second property whilst keeping the London flat. I transferred the London flat into joint names with my wife in 2001, for rental income tax purposes.

Can someone please advise me the following -

1.Given the circumstances, can I still claim Private Residence Relief on the London Property for the period I worked abroad (without having to live in it again at some time in the future)?

REPLY: It appears that your circumstances are within the qualifying period of absence described in IR 283, provided you had no other dwelling house eligible for PPR relief during the same period, and you were in employment abroad, and you were unable to return to your dwelling house after returning to the UK because your existing job required you to work away again.

2.Can I claim Private Residence Relief on the London property for the year I rented in Oxford (prior to buying the second property)?

REPLY: Again, according to IR 283, absences totalling upto 4 years are allowed provided the distance from your place of work prevents you living at home. Strictly speaking, you need to have made a nomination in favour of your London home (as against the Oxford leased home) within 2 years of having the Oxford home. But you will be able to obtain an extension of time to make the nomination if you request this without undue delay.

3.Considering my wife has never lived in the London property, although it is now in joint names, when we come to sell the property is she entitled to the same reliefs in the same quantities as myself, most particularly Lettings Relief and Private Residence Relief?

REPLY: Your wife has never occupied the London home as her only or main residence. It appears to me that she is not entitled to the PPR relief and therefore also the lettings relief.

4.If she’s not entitled to the same reliefs as me, and I therefore choose to transfer the London property back into my own name prior to selling, does the fact that she has at some time joint owned the property with me, affect the reliefs I can claim?

REPLY: The mechanics of transfers between spouses are by no means straight forward. I am of the opinion that the fact that she has at some time jointly owned the property with you will not affect the reliefs you can claim?

Thanks
Tony Wooding

See replies above in red.

You should also read H M Revenue & Custom's Help Sheet IR 283 and also write to your tax office without undue delay to nominate the London home as your only or main residence as against the Oxford leased home.

No responsibility is accepted for the replies above and you are recommended to seek professional advice before acting on the replies given.

Ramnik