Capital Gains Tax

If PPR relief is available, Lettings Relief is also available, as the whole CGT computation is time based. it does not matter whether the letting is pre or post PPR dates.

You're welcome, RR.

However, one needs to distinguish between the circumstances where there is an PPR election and where there is not. As you say, there is a 2 year time limit from the "event" to make the election. This can be varied at a later date with up to 2 years retroaction. But no election, no possible change of election.

It used to be thought (and I was one of those people) that the carry back of

2 years could be made at any time. But Vinelott J in Griffin v. Craig-Harvey thought that was not even a possible construction!

Again, the IR might allow late elections and rectifying invalid elections.

But the wording goes something along the lines that LR is available "where PRR is restricted as a result of letting". That seems to suggest that letting occurring prior to actual or elective PPR status, which is also prior to the last 36 months, does not restrict PRR (unless there is some way an election could have been made), and therefore I'd have thought LR for year one out of four would not be available.

Hmm, it looks like the above wording (if I remember it accurately), used in IR leaflets, does not accurately reflect the wording in TCGA 1992 s223 (4).

That's what I said first (based on IR leaflets) but I subsequently changed my mind because the impression I get from the actual statute is that there does *not* need to be an event, since the statute does not say there needs to be one, unless there is a hidden definition somewhere that "any period" should mean "any period commencing on an event". But there can be no such definition (see below) because that would restrict the option to vary to periods also marked by events.

Agreed, but there is no explicit qualitative difference between a varying election and an initial election, since both apply to what the statute calls "any period" without qualification.

Google didn't throw up anything particularly helpful. Can you quote (or link me to) the salient points of Griffin v Craig-Harvey? As it is, the wording of 222 (5) does *not* suggest that there needs to be a qualifying event to delimit any period in respect of which you wish to make or vary a declaration. For reference, from 222 (5) verbatim:

--quote (5) So far as it is necessary for the purposes of this section to determine which of 2 or more residences is an individual's main residence for any period [1]

(a) the individual may conclude that question by notice to the inspector given within 2 years from the beginning of that period but subject to a right to vary that notice by a further notice to the inspector as respects any period [2] beginning not earlier than 2 years before the giving of the further notice,

--unquote

Prima facie there is no qualitative difference between the two occurrences of "any period" which I have labelled [1] and [2] in the above. To me this suggests that if I want to make an election about the period beginning

1/1/2000, I must do so before 1/1/2002, and if I want to vary such an election on 1/1/2003, I can do so but its effect will be limited to the period after 1/1/2001. However, the same bland wording "any period" is used both in the varying and the making situation, and since it does not appear that there needs to be any event on 1/1/2001 for my 1/1/2003 variation to become effective, it should follow that neither need there be an event on 1/1/2000 for my initial declaration on 1/1/2002 to become effective. Therefore even if the latest event was on 1/1/1999, I should still be able to make an initial declaration on 1/1/2002 as respects the period from 1/1/2000.

Do you have stuff from G v C-H at your fingertips which would explain why this should not be so?

"Ronald Raygun" wrote in message news:XoMwc.1800$ snipped-for-privacy@news-text.cableinet.net...

I don't have the full text of the case to hand. But the Inland Revenue CGT manual does have a reference:

I have a synopsis :

"Where a person has two or more residences at the same time, so that it is necessary to determine which is his main one for any period, he can conclude that question by notice in writing to the Inspector given within two years from the beginning of that period (TCGA 1992, s 222(5)(a)), i.e. he can elect to which the exemption is to apply, but such an identification cannot apply for a period starting earlier than two years prior to the date of the election. The Revenue consider that the election has to be made within two years of the acquisition of the second home. This was upheld in Griffin v Craig-Harvey (1994 STC 54). The reasoning in that case is difficult to follow. Section 222(5) previously CGTA 1979, s 101(5) reads: 'So far as it is necessary ... to determine which ... is the individual's main residence for any period - (a) the individual may conclude that question by notice ... given within two years from the beginning of that period ..., (b) subject to paragraph (a) above, the question shall be concluded by ... the Inspector, which may be as respects either the whole or specified parts of the period of ownership in question.'

The Special Commissioners held that 'that period' in (a) must relate to 'any period' in the introductory words, which most people would think is the natural construction. Vinelott J however thought that was not even 'a possible construction', and that it must refer to the 'period of ownership' in (b) albeit both that the word 'that' normally refers to something that has gone before, not something that follows, and that (b) is in any event made subject to (a) so would not normally need to be even looked at where (a) applies. He supported his view by reference to Hansard. The Minister said in 1965 in introducing the provision, 'there is no provision for the case of a man who has one house and does not need to make any option but who later buys another house and then wishes to opt to treat the other as his principal residence. The effect of this Amendment is to keep open the option so that he can exercise a choice within two years from the time when he acquires the second house.' As the Minister talked of 'the effect' rather than 'the purpose' the taxpayer's construction would have the same effect, albeit that it would also have further effects, and the Minister gave no indication that the amendment was intended to deal solely with the circumstance he outlined. Accordingly it is not clear why Vinelott J felt that it resolves the ambiguity in the wording, a sine qua non for recourse to Hansard to be permissible under Pepper v Hart (1992 STC 898).

13.6 The election can be varied at any time by giving a fresh notice. Again the variation cannot apply to any period over two years before the date of the new election. Vinelott J in Griffin v Craig-Harvey specifically accepted that if an election is made within two years of acquisition of the second property it can be varied at any time. He also specifically accepted that: (a) if a person who has two residences acquires a third, an election between all three properties can be made within two years of acquiring the third; (b) if a taxpayer owns three properties and ceases to use one of them as a residence, that cessation will trigger a fresh right of election between the other two; (c) if a taxpayer with two houses transfers one to a settlement of which he is the life tenant the transfer will trigger a fresh right to elect (jointly with the trustees); and (d) if a taxpayer has two houses one owned by himself and the other by a trust the transfer of the trust property to the taxpayer will trigger a fresh right to elect. He declined to comment on what happens if a taxpayer who owns a residence and a let property begins to use the let property as a residence. Logically that triggers a new right to elect. In other words it appears that where a taxpayer has more than one residence any event that results in his beginning or ceasing to use a property as a residence, or in a change of ownership of one of them, will trigger a fresh right to elect - but only with effect from the date of that event - provided that he occupies at least two properties as residences immediately after the event."

I hope that helps.

I was also referring merely to the availability of Lettings Relief, not its quantum - which can be, as you say, restricted to less than the 40,000 maximum. Part of restriction is required to prevent a CGT loss arising.

"Doug Ramage" wrote

Isn't all this a bit silly?

Can't *anyone* just get around the Revenue's requirement simply by

*immediately* making an election (eg for the "default" property - ie the one that would be classed as PPR without any election) whenever an "event" arises?

This would :-

(1) Leave the property owner in the same position initially as if they had not made any election; and (2) Give them the option to later **at any time** make a new election ("fresh notice") which varies the PPR for the previous 2 years - whether or not there was an "event" 2 years previously!!

... which is exactly what the Revenue is trying to stop, and also what we would think the rules should be interpreted as anyway!

OK, this doesn't help people who are now outside the 2 year "window" and whom didn't happen to have made an election during the two years. But for the future - shouldn't we all just remember the following moral :-

Moral: Whenever an "event" occurs with multiple-ownership, *always* make sure you make an election - even if it is for the same residence as would default to your PPR.

The only thing the IR wanted to "stop" was the making of the election more than 2 years after an "event" - which was the generally held view (apart from the IR). The problem is compounded when there is a varying election; this would be invalid, if the original was invalid.

It certainly does, thanks. At first sight one is tempted to conclude that Vinelott did not attend a decent grammar school (in the sense of one where one actually learns grammar). He does have a point, though. It seems it's actully not his, but the statute drafter's grasp of grammar which is faulty, and Vinelott was able to cut through it.

It's philosophically a difficult question whether, when there is clearly a mistake in a rule, one should go by what the rule would be with the mistake corrected, or stick with the verbatim rule text until it is explicitly corrected by an amending statute. I guess established practice favours the former approach.

What appears to be at the bottom of this, is that were it possible to make a first election within 2 years of the start of *any period not necessarily marked by an event*, then it would render redundant the option to vary it, since the same effect could be achieved by simply making a fresh election.

"Ronald Raygun" wrote

I must wonder which version ("corrected" or "verbatim") was considered by the people (MPs, Lords) voting on the statute when it was passed.

Those reading it verbatim may have voted differently if they knew it would be interpreted as "corrected". Those reading it "as corrected" may have voted differently if they knew it would be interpreted as "verbatim".

Would it have been passed, if the future interpretation had been spelt out clearly on passing through the Houses??