How long does a landlord have to live in a buy to let for the property to qualify as a main home for capital gains tax has been clarified by a tax tribunal ruling.
The question is frequently asked by property investors looking to reduce their capital gains tax bills on disposing of a property.
The generic answer is there is no real length of time as whether the property becomes a home depends on a stack of other factors.
These include actually moving into the property and living there for a period – and moving in includes listing on the electoral roll, changing the utility bills into the owner’s name, changing official documents like driving licences and bank statements to the address and so on.
A recent tax tribunal case tidies up the thinking of what makes a main home for HM Revenue & Customs (HMRC).
In the case Piers Moore v HMRC, the First Tier Tribunal was asked to define if Mr Moore qualified for private residence relief to reduce his capital gains tax bill on the sale of the home.
Builder Moore bought a ‘doer upper’ in Huntingdon, Cambridgeshire, intending to refurbish the property and move in as his main home.
However, he told the tribunal he has a disagreement with the neighbours and rather than live there let out the property for five years.
During the time he was refurbishing the two-bed house, Moore lived there for three months, so on disposal of the property claimed private residence relief of 39 months – the time he lived there plus three years.
HMRC disagreed the property was his home and that he could claim the relief and calculated he owed £14,448 in capital gains tax that he failed to pay as he argued he lived in the house and was entitled to the reduction in his tax bill.
Unfortunately, he could provide no evidence to show he lived in the property and HMRC proved he had purchased and renovated another property for renovation and sold it three years later.
The tribunal rejected Moore’s appeal against the assessment on the grounds he could not prove the house had been his main home.