One of the most frequently questions a tax adviser
gets asked is “how long do I have to live in
a property before HMRC will accept that it is my “main
residence” and thus exempt from capital gains
tax when I sell it?” The question is fair but
the answer is difficult...
Example
My own opinion is that there is no minimum period
of time, and I give the example of someone who moves
to a new city to take up a job and buys a small flat
to live in. He moves in and starts the job but a week
later he wins millions on the lottery. He resigns
from his job, spends some of his winnings on a world
cruise, and on his return he sells the small flat
and buys a country house.
He
only spent a week in that flat, but I defy HMRC to
argue that it was not his “only or main residence”
during that time, and thus exempt from capital gains
tax (CGT) on any gain he might make when he sells
it. The point is that he actually lived in the flat,
and (until his lotto numbers came up a week later)
he regarded it as his home.
HMRC,
who seemingly make up the law as they go along, have
for a long time tried to introduce the concept of
a “temporary” residence, which does not
qualify for exemption from CGT. There is no reference
to “temporary” in the legislation but
this has not deterred them from using a short period
of occupation as a reason to seek to deny relief for
a “main residence”.
