Do you own multiple properties?
Well, if that applies to you, Steven Glicher accountants would like to flag up certain changes to Capital Gains Tax PPR relief that just might affect you. Our concerns appear to be shared by the Chartered Institute of Taxation (CIOT). Responding to HM Revenue and Customs’ (HMRC) plans to extend capital gains tax (CGT) to non-residents in certain circumstances, CIOT has responded by saying it fears the proposal could have a significant impact on UK residents owning more than one property.
So what are these changes and what do they refer to? Well, the proposed changes were originally suggested in the Chancellor’s Autumn Statement in 2013.
The aim of the proposed changes was to improve fairness within the UK tax system. What the changes will mean is that non-residents will be able to claim principal private residence (PPR) relief. That in itself is laudable, but in order to ensure that this relief does not undermine the proposals, the Government intends to withdraw the ability of anyone with more than one residential property, and that includes UK residents, to choose his or her main residence by election. The decision will henceforth be determined by HMRC who will make the call, based on ‘demonstrable’ evidence, which of the owner’s properties is his or her main home.
So why is the Chartered Institute of Taxation concerned? According to Stephen Coleclough, president of the CIOT, it fears that many owners of multiple properties will be hit by these changes without realising:
“The withdrawal of the principle private residence election is a much wider issue, affecting many UK residents with two homes, not just non-UK residents with residential property here,” said Mr Coleclough.
“This is for a good reason – many people live in one place for work during the week and another during the weekends and holidays, often meaning the lines are blurred as to which is the person’s or their family’s primary residence. If the plans were to go ahead, then UK residents could be faced with CGT charges on their first or second properties, with no certainty as to which is which.
“If the Government wants to change the principal private residence election or the rule generally, there should be a free standing consultation on that issue. There may be perfectly good reasons why they do want to change – we have recently seen evidence of MP’s using the rules to ‘flip’ their principal private residence repeatedly.
“Changes to how primary residency is decided should not be hidden behind an obscure consultation, aimed at bringing a narrow group of non-residents in to the charge. These points should be considered in an open and grown up manner, and we urge the Government to think again on this issue.”
Capital Gains Tax is a highly complicated area of tax law requiring specialist knowledge.
If you would like to minimise your CGT liabilities, or need expert advice on EIS, SEIS or EMI, then contact Steven Glicher accountants. For further information call Steven Glicher accountants on 0161 485 8007.