Buy to let mortgages etc.

sorry one futher thing..

"The sale of any property other than your main residence attracts capital gains tax (CGT) so with a buy-to-let property some of your profit will go to the tax man. More on this later. "

Would this apply if living at home with parents?

Yes. But the property would be exempt from CGT for the period(s) it was your main residence - which it could not be when it is rented out.

If you don't rent it out, but continue to live with your parents ( not a good financial option, usually), then you can nominate which residence is your main one for CGT purposes - you would normally nominate the one you own.

There are other reliefs to reduce any CGT payable - including taper relief, Lettings Relief, annual exemption.

The Inland Revenue have a booklet IR150 on property rental - you can download a copy from their website.

Probably not.. But you would probably need to inform your lender of the change of use - this might involve an increase in the interest rate.

"Doug Ramage" wrote

Is the PPR "election" strictly available if you don't own more then one residence?? Or will it simply be based "on the facts"?

The legislation is not drafted in terms of ownership, but of residences, which means that your main residence could well be rented accommodation (or living rent-free with parents etc). It would be a rare occasion where the rented property would gain from PPR nomination (lease premium).

There is the normal 2 year time limit for nomination, but there is an IR concession if someone failed to realise that a nomination was required.

In theory it could be. The reason behind why you can't nominate as your main residence a property you rent out is that a nominated residence must be *capable* of being used as your residence even if you choose not to use it as such. If you rent it out, it is presumed that the presence of the tenants precludes yours. But if you only rent out *part* of the property, retaining rights at least to exclusive use of a bedroom and to shared use of the rest of the property, then it *would* be capable of being your residence, and it would be just like as if you were a resident landlord who happens not to reside there. Technically the tenants would not be tenants but lodgers.

I guess in the long term gains would still be taxed pro-rata (e.g. if you rent out 80% of the property while 20% of it forms your nominal residence, then 80% of the gain would be taxable) but you should still qualify for the full 36 month rule and the associated Lettings Relief.

Except that it should be pointed out that LR is not available if there is no element of (at least nominal) private use.

By the way, Doug, it has often been mentioned here that there is no minimum period of private use to qualify for PPR status, i.e. it is quality rather than quantity of private use that counts. But in the case of nominated use, as distinct from actual use, how is that quality tested? If you own no other property (live with parents/friends or in rented accomodation), and buy one with the intention of letting, can you nominate it for the period before your first tenants take up residence, and for all the vacant periods between tenants? Or would the usual sham-recognition processes operate (such as noting that your pre- and post-nomination residences were the same and you hadn't really given them up during the nomination)?

IMHO, occupation (as a residence) of the property must take place to benefit from a PPR election. So, in theory, the nomination would be invalid for the period up to occupation by the tenants, and not possible (subject to partial letting) while there were tenants.

Is there any reason why he couldnt rent it out but also nominate it as his main residence. For example, if it was a 2-bed flat and he kep one room as 'his' even if he only occasionally slept there (and maybe had mail including his tax mail delivered there also), would that be (a) OK legally, and (b) OK in practice since how would they know?

Cheers for the info, i shall take a look at the IR website.

Ta

Liam

I understand the "not possible" part, but not the "invalid" part. Surely if the property in question is furnished in the initial period and is capable of occupation as a residence (and for good measure is actually occupied as a residence for a few days), that should make it as eligible for nomination as in your example where no letting takes place. Surely the mere intention of letting is not enough to throw a spanner in the works.

"Capable" is not good enough without some residential occupation. If the "few days" was a result of a change of plan/circumstances, then, in theory, that should be OK. You might an uphill struggle convincing the IR/Court of this.

(a) In theory, partial occupation should trigger pro rata PPR relief and thus Lettings Relief.

(b) Under SA, the onus is on the taxpayer to calculate the CGT payable, if any. The penalties (including imprisonment) can be high for fraud/negligence. There are quite a few ways the IR can find out - one is disgruntled tenants.

How would they possibly know what he did re CGT?

Because if the rent stops, the IR could ask why, and the sale would come to light. Or the change of address.

Also, not sure if the Land Registry still supply the Tax Offices with details of sales & purchases.

Well, thats got nothing to do with disgruntled tenants. And what change of address? If he had at least his tax letters sent to the flat in q, there wouldnt be a change of address until he sold, and then all they would see is someone who sold the house they were living in and then moved. I suppose he could also claim the rent under the 'rent a room' scheme or whatever its called, depending on the size of the flat.

Again, there would be nothing unusual there. He owns a house, the IR sends his tax correspondence to it so as far as they know he lives there, and when he moves, he tells them his new address which is confirmed by the land registry sale and purchase, (on the incredibly unlikely chance they would ever do any sort of checking on that, looks-out-of window-for-flying-pigs). All nicely joined up :-)

Disgruntled tenants seeing his tax correspondence coming to what is really "their" flat, would think nothing of telling the IR, just for a laugh, that they suspect he might be up to something dodgy.

But with the tenants' statement to the effect that he wasn't living there, ...

For that he would need to be actually resident.