tax question please

[ZuluMike]

I've asked at handbrake house but got blank looks, and can't find an answer on the HMRC website - advice much appreciated.

We've lived in married quarters for 5-6 yrs due to postings and our house has been rented out throughout this time. We're now selling - are we liable for CGT or are we treated as though we lived there (ie primary residence) and therefore we don't pay any CGT on any profit?

[Stuff]

I'm not a tax expert but this HMRC guidance note seems to cover it CG64555 - Private residence relief: two or more residences: job related accommodation (http://www.hmrc.gov.uk/manuals/cgmanual/CG64555.htm)

The bit you want is half way down:

Job related accommodation will be occupied either under a service occupancy or a tenancy. Under a service occupancy the property is occupied under licence and as such it is not a residence within the meaning of section 222. Therefore if the individual has only one other residence, there is no need to make a nomination in favour of the property which is intended as the main residence in due course. Job related accommodation occupied under a tenancy is a residence within the meaning of section 222. Therefore the individual may nominate which of his or her residences is to be treated as the main residence, see CG64485. In the absence of a nomination, the main residence must be established by reference to the facts, see CG64545.

It may be that the individual never actually occupies the dwelling house that they intended to occupy due to a change in circumstances or some other reason. Nonetheless, providing it was always the individual’s intention to occupy that dwelling house, relief will be available.

The key is that you have to have intended to live in that house and it's only the Service that got in the way of that. If that's true then no CGT.

Good luck!

[ZuluMike]

genius! thanks for that, my eyes are obviously not weapons as I missed that entirely. very much obliged.

[TomJoad]

Zulu, again not an expert but I can concur with Stuff. We were in exactly the same situation in the last couple of years of our service - you simply make the declaration that the house you owned was your designated primary residence. In fact from what I recall you don't even need to inform the tax office - the solicitor did that all for us I think as part of the usual conveyancing transaction. Having said that, we were selling under the Scottish systems so things may differ down South. I would check with your solicitor.

[ZuluMike]

thanks all, I will check with solicitor but sounds like we can stop worrying about that one. thanks for taking the time to advise.

[Whenurhappy]

We faced the same problem a few years ago and it is best resolved by writing to HMRC Tax Office and explaining that you want your house declared your principal private residence and that you would be living in it subject to the exigencies of the Service. You will be sent a letter and treat this like gold as HmRC record keeping seems to be lacking. You can flip-flop your PPR between different properties (as the MPs did) quite lawfully to avoid CGT. Just keep meticulous records of all expenditure and income. The way we have down it was based on running a non-public fund at Lyneham many moons ago, but updated to running a spread sheet showing income and expenditure - the latter broken down into the areas required by a Tax Return ( eg insurance, maintenance, administration, finance charges, capital improvements and so on). I'm sure there are proprietary software packages, but there is no substitute for maintaining a ledger and scanning all expense receipts.

Of course I can't give you advice - this is simply an account of our experiences that is simple and workable - and has survived two HMRC Audits