Helping clients secure capital gains tax exemption on their main residence

We have grown accustomed to not paying tax on our main residence, and the principal private residence (PPR) relief for capital gains tax is rather taken for granted.

. The key message for clients is to be clear what is needed for PPR, and ensure they 'tick the boxes' to secure this invaluable relief. With the property market in many parts of the country now giving prospects of short-term gains, this is relevant to many.

It is particularly important where one relationship is ending and another may develop soon, as in this case.
about what happened in that nine months, but he clearly made mistakes from which we can learn.
The end result was HMRC denied PPR relief on the basis that he had not established a sufficient degree of permanence, even though the statutory authority for PPR (section 222 of the Taxation of Chargeable Gains Act 1992)

This is very relevant both for lawyers advising on residential property transactions, and for family lawyers, where a client is moving out of a matrimonial home into a different residence.

Mr Piers Moore separated in November 2006, moved into a two-bedroom house he owned (previously let out) in Huntingdon and lived there one way or another until buying a home with his new partner in July 2007. The facts are rather muddled

makes no reference to intention or permanence. It refers to being "his only or main residence" and indeed here it was his only one.

So what guidance can we

'¨

offer clients?

1.

Always advise HMRC of your new address straightaway, '¨and never tell them it is a temporary address.
2. Notify your bank, any lender, insurance company and, indeed, all authorities of your new address. Don't have some post going to one address (such as your old matrimonial home) and other post to a c/o address (like a new girl/boyfriend). While it takes '¨a bit of paperwork, you can always sign up to a redirection of mail service if you move again, and the effort may save a tax liability.
Be careful about marketing your new home for sale again, and don't do 2007 or in April, which was better as it followed his decision to marry and buy a home with his girlfriend. The more blatantly you are selling a home for short-term gain '¨the more at risk you are of losing your PPR in this '¨new environment.
Holding a house/flat warming party, and keeping the invite, photos, etc adds a nice layer of reality, which is good to have up your client's sleeve. The more personal touches you can bring in, such as proper furnishings, redecoration, photos, etc, the better, showing it's not just the setting for an occasional stopover.
While there isn't a formal burden to 'prove' a degree of 'permanence', it begins to seem like it, and thus clients should keep all they can as evidence to prove they intend to live in this property permanently. At least, avoid signs of looking to move on as soon as can be arranged.

3.

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5.

'¨In Mr Moore's case, it was much better to be marketing his property after a decision to marry/live with his new girlfriend than doing so earlier. The case must be distinguished on its facts, where it seems the judge was not impressed by the evidence given and the lack of corroboration. It helps if the client and new partner can both be 'on message' together. SJ