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Possible new tax regime over UK second homes

cottagePeople with more than one property in the UK could be eligible for a new tax.

If property owners spend more time living in their second home, a change in the rules could force them to pay tax when selling the main family home.

This would result in HMRC receiving a substantial amount of capital gains tax.

As it stands, there is no capital gains tax payable when a main residence is sold, although the deemed second home has a 28% charge on any growth in value.

Current legislation allows home owners to select which home is their main one.

But should the proposal be agreed, from April 2015 the power of decision could rest with the tax office, based on where the greater amount of time is spent.

Such assessment could be by either a “balance of evidence” (such as, voting and tax registration and where post is received) or a fixed rule which makes a person’s main residence the one where more time is spent.

More than 250,000 properties in the UK are second homes, according to council tax records.

The proposal was outlined in a government consultation initiated last week. That consultation was prompted by wanting to find ways to make non-residents pay capital gains on property in the UK, but will also impact on British residents.

The consultation follows changes, which begin 07 April, reducing by half the amount of time an individual has to sell a second home before capital gains tax is due. Previously, if a second property was declared a main residence at any time, there was no capital gains tax to pay for the final three years of ownership. This now falls to 18 months.

A spokesman for HM Revenue & Customs said: "The changes in the election of private residence relief on an individual's main residence are proposals and we are seeking views on how best to implement this change.

"Apart from the final period, individuals currently receive the relief for only one property at a time even if they have more than one home, and this will not change."

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Comments  

0 #1 Chip the Duck. 2014-04-08 11:19
I'll bet this won't apply to MPs' second homes that are financed by the taxpayer.

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